China in a surprise move on Monday night devalued its own currency and that decision was immediately felt on Wall Street.
Traders, questioning how the devaluation might affect the Fed’s decision to raise interest rates, punished the Dow Jones Industrial as futures were trading down by 152 points by 8:25 a.m. ET. The dow was down 0.87% to 17400. The S&P 500 futures also dropped by 16 points or 0.77% to 2083. The Nasdaq 100 futures fell 24 points to 4541, a 0.54% decline.
The People’s Bank of China decided late Monday night to devalue the countries main currency by 1.9%, the biggest drop in more than two decades. That drop led to a three-year low against the U.S. dollar. The move is meant to jumpstart the countries exports business which has been suffering of late due to increasing worker wages in the country.
“Since Beijing is very protective of the yuan, it is a clear sign that it is running out of ideas,” David Madden, IG market strategist, said in a note. “China is trying to portray an image of a gentile slowdown, but in reality it is trying frantically behind the scenes to keep its levels high, and traders aren’t buying it.”
China’s stocks, which have taken a pounding over the last several weeks were down 0.01% following the devaluation. Hong Kong’s Hang Seng fell 0.09%, and Japan’s Nikkei dropped 0.42%.
U.S. crude oil dropped 2.42% to $43.87, while Brent, the international benchmark, declined 1.69% to $49.56.
Gold, which has been falling steadily over the last several months jumped 0.43% to $1,108 per troy ounce, while copper continued to decline at a new price point of $2.34 a pound, a 2.48% drop.
With a devalued Yuan analysts will not begin to pay even closer attention to the Fed and its decision regarding an interest rate hike.