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By Bloomberg

The dollar and the euro climbed for a second day as China continued to devalue the yuan, sending investors retreating to haven assets.

The Aussie slumped to a six-year low after the People’s Bank of China again set it currency’s reference rate significantly lower, sending the yuan toward its steepest two- day tumble in two decades. A gauge of the dollar was with 0.5 percent of a decade-high while the euro advanced for a fifth day as Greece reached an accord with creditors.

“It was uncertain where the renminbi was going to today and whether the PBOC was going to signal further weakness, and clearly it has given a green light to resume the declines we saw in the majors yesterday on the back of that one-off devaluation,” said Sue Trinh, senior currency strategist at Royal Bank of Canada in Hong Kong. “Those that have China as a major trading partner are suffering the most.”

The Bloomberg Dollar Spot Index rose 0.2 percent to 1,215.46 at 6 a.m. in London, adding to Tuesday’s 0.5 percent advance.

The Australian dollar fell as much as 1.2 percent to 72.16 U.S. cents, the lowest since April 2009. New Zealand’s dollar slid 0.7 percent to 64.91 U.S. cents. Both South Pacific nations count China as their biggest trading partner.

Competitive Devaluation

“The market is saying here that if you export to China, you may well have to go one step further to weaken your own unit,” said Chris Weston, Melbourne-based chief market strategist at IG Ltd. “There is a lot of uncertainty here; markets obviously don’t like that.”

The euro strengthened 0.3 percent to $1.1072, after climbing 0.2 percent to $1.1042 Tuesday, when it surged at least 1.5 percent versus the Aussie and kiwi dollars.

The greenback and euro have rallied this week as investors fled China-exposed markets for the relative safety of U.S. and European government debt. A rally in 10-year Treasuries sent yields down to levels unseen in three months, while those on Australian notes fell Wednesday to a one-week low of 2.68 percent. Stocks tumbled around the globe.

China’s central bank cut its daily reference rate for the yuan by 1.6 percent on Wednesday, after reducing it by a record 1.9 percent on Tuesday. Vietnam responded by widening the dong’s trading band on Wednesday.

“The PBOC is making the yuan fix more market based,” said Callum Henderson, the global head of foreign-exchange research at Standard Chartered in Singapore. “The short-term impact is again negative for Asian currencies specifically and EM more generally.”