PBOC devalued yuan fix by the most on record (1.9%) overnight. The reference rate is now set at 6.2298, from 6.1162 previously. USD/CNH (offshore yuan) has so far rallied almost 1900 pips and is currently stalling ahead of 6.40 level.

PBOC officials said that this move is a one-off adjustment, but that appears unlikely as strong yuan is one of the main obstacles to Chinese exporters and devaluation will likely be needed if they wish to remain competitive. The move may also signal that they'll do whatever it takes to maintain 7% growth.

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