http://www.wsj.com/articles/shares-fall-after-fed-reserve-keeps-rates-on-hold-14

Question

http://www.wsj.com/articles/shares-fall-after-fed-reserve-keeps-rates-on-hold-1442563519

Please help me answer this questions based on the article link above!

Question #1: Why would the US stock market be affected by China’s move to devalue its currency?
Question #2: In the article, it says, “Many investors felt a rate rise would have signaled the central bank’s optimism about economic growth.” Why is that?
Question #3: “Many emerging markets have been dealt a sharp blow in recent months as a result of a slowdown in China’s economy coupled with fears of a U.S. rate increase.” What does the slowdown of China’s economy has to do with the U.S.?

Explanation / Answer

Chinese government has allowed its currency ( Yuan) to decline in value by about 4 percent against the US dollar. A cheap Yuan provide Chinese exporters benefit in world markets, harming US businesses.         

There are many businesses in China that sell goods and services to United States customers. Their goods priced Yuan that is valuable relative to the dollar; Chinese imports rapidly become cheaper in America. Yuan falls by 4 percent; every business in China cut its prices for Americans by 4 percent. Stocks, currencies and commodities will fall sharply.

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