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What's Behind China's Currency Devaluation?

The two principal motives behind Beijing's decision to allow a freer-floating currency are an internationalized RMB and halting recent capital outflows, says Morningstar's Dan Rohr.

Dan Rohr: Beijing's decision to devalue the [yuan renminbi] rattled already jittery financial markets. There's certainly good reason to be concerned. After all, the past 30 years is littered with examples of devaluations triggering global crises.

So, it's worth getting a handle on what Beijing aims to accomplish with the devaluation. If you subscribe to the theory that they're trying to prop up exports, it's possible that a 30% to 40% fall in the RMB is in the cards, which would be immensely destabilizing to global trade and global capital flows.

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