Chinese move to devalue yuan dangerous and unpredictable, says HDFC MD Aditya Puri

Thursday, 13 August,Mumbai : HDFC Bank’s manging director Aditya Puri on Thursday said China’s move to devalue its currency is “very dangerous and unpredictable” and feared that this may lead to a “competitive devaluation”.

“What China is doing is very dangerous and unpredictable … devaluing the yuan twice in two days… unless something is done, will lead to competitive devaluation,” Puri, who heads the country’s second largest private sector lender, told reporters here.

He said the move will affect exports from all the countries, including India, saying China is already a cheap manufacturer of goods and if it becomes more competitive with moves like the ones we are witnessing, the impact will be “phenomenal”.

The way ahead for the world is only competitive devaluation or levying duties on imports.

However, Uday Kotak, who leads the country’s fourth largest private sector lender Kotak Mahindra Bank, sounded more confident in the face of the troubles.

He said the markets have already stabilised after two days of reverses and exuded confidence that the Indian policymakers will do the right thing to ensure that the exports from the country do not suffer.

Chinese currency on Thursday continued its sharp fall for the third consecutive day, sending jitters in the markets as the central bank assured that there will not be currency slump as feared by many at home and abroad.

China had devalued its currency twice within two days, sending shock waves and fuelling fears of a currency war.

The central parity rate of the yuan on Thursday weakened by 704 basis points, or 1.1%, to 6.401 against the US dollar, narrowing from yesterday’s 1.6% and almost 1.9% on Tuesday, according to the China

Foreign Exchange Trading System, state-run Xinhua news agency reported.