New York (HedgeCo.net) – When the Chinese government moved to de-value the yuan on Tuesday, the shockwaves were immediate and far reaching. Every major index around the globe was down on Tuesday with the Shanghai Composite near breakeven.

The United States has been pressing China for years to let the market determine the exchange rate and that is what is calling Tuesday’s action, a move toward free-market reform. Most experts aren’t seeing it that way and the United States warned China that any wavering from a previous commitment to allow the market to determine the exchange rate would be viewed as “troubling.”

In January, the Swiss government announced it was de-pegging the Franc with the Euro and the extreme reaction in the exchange rates caused several hedge funds to close shop due to losses.

Will China’s devaluation have the same type of impact in the hedge fund industry? We will have to wait and see on that. One thing is certain though, U.S. multinationals that export to China are concerned about the action as their products just increased in price.

Rick Pendergraft
Research Analyst
HedgeCoVest