It is also a timely reminder that the US Federal Reserve’s seeming determination to raise interest rates next month risks propelling the dollar even higher, to the dismay of US companies already struggling to maintain exports.
Here is what Fed officials will see when they get to their desks this morning and check out what’s been happening in the currency markets while they were sleeping:
By cutting its daily reference rate for the yuan by a record 1.9%, the Chinese central bank is taking big risks, both politically and economically.
The Chinese authorities know that Chinese companies owe the rest of the world more than half a trillion dollars in bonds and loans denominated in dollars and euros.
Bloomberg reporters calculate that yesterday’s move could add $10bn (€9.1bn) to that cumulative corporate debt burden.
However, the overseers of China’s monetary policy, who are charged by the government with delivering economic growth of 7% this year, are clearly more concerned by the 8.3% drop in Chinese exports in July.
The decision “raises the distinct possibility of a new and increasingly destabilising skirmish in the ever-widening global currency war”, according to Stephen Roach, the former non-executive chairman for Morgan Stanley in Asia, who is now a senior fellow at Yale University.
Economists at JP Morgan called the move a “Pandora’s box” which China’s neighbours will view as a “competitive devaluation”.
It is the US, though, that might take the most offence at the devaluation. US companies have bemoaned the strength of their domestic currency.
Walt Disney was the latest to report that currency-market shifts dented revenue, saying last week that it suffered a $100m shortfall at Disneyland Paris.
The dollar has been on a rampage for four years.
The dollar has gained against its peers partly because other countries have engineered weaker currencies for themselves, but also because its economy is perceived to be improving and the US Federal Reserve is one of the few central banks in the world contemplating pushing up borrowing costs and deposit rates.
Officials in the US would be forgiven for wanted to avoid a further surge in the dollar that would signal the country is surrendering to its opponents in the currency wars.