The People’s Bank of China surprised markets on Tuesday by lowering the reference rate that determines the mid-point of the renminbi’s trading band against the US dollar. Although the bank explained the policy change as part of financial reform, markets initially interpreted the move as an effort to devalue the currency. Commodity prices fell on the news, with the exception of precious metals which benefited from some renewed safe-haven demand. The stabilisation of the Renminbi later in the week assuaged fears of impending “currency wars” and prices regained some lost ground. Agricultural commodities prices were also driven by supply developments, particularly the price of coffee which surged this week amid expectations of a smaller Brazilian crop.
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