In setting the value of the renminbi at nearly 2% below the value of the dollar, the surprise move was the largest devaluation since China’s exchange-rate system was introduced in 1994.
The after-shocks have been swift and harsh for the already struggling commodities markets, which have relied heavily for the past decade on China for demand growth and which have been hit hard by the country's slowdown.
Bottom line, it is now more expensive for a Chinese commodities consumer to import and more profitable for it to export. Theoretically, this means more aluminium exports to an already well-supplied global market and less copper imports from a west desperately in need of Chinese consumption growth.
The devaluation has already had an immediate impact on commodities trade. The devaluation is equivalent to roughly $170 per tonne of copper; with the arbitrage window...