Short interest in Apple Inc. (NASDAQ: AAPL) dropped 3% in the two-week reporting period ended July 31. Some 60.25 million Apple shares were short, about 1.1% of the company’s float. Days to cover was just over one, at an average daily volume of nearly 52 million shares traded.

Apple is the tenth most shorted stock on the Nasdaq and in the two weeks leading up to July 31, the stock fell about 11%.

Since July 15, shares have dropped from $126.82 to Tuesday’s closing price of $113.49, and nearly half that drop — more than 5% — occurred on Tuesday following the devaluation of the Chinese yuan. Predictions of doom and gloom are thick on the ground for Apple and other U.S.-based companies with big exposure to the Chinese market.

Not only does the weaker yuan translate into lower revenues when Apple brings the cash home to the United States, it also gives the company’s China-based competitors a price advantage by lowering the costs of making competitive smartphones and selling them in the United States for dollars, which are then repatriated to China at a more favorable exchange rate.

That gives Chinese smartphone makers like Lenovo, Huawei and Xiaomi the option of lowering their prices to increase their market share without losing margin, or of keeping their prices at current levels and increasing their margin, probably without losing share.

Apple can raise iPhone prices in China, but if competitors respond by lowering their prices further, Apple’s market share could begin to erode.

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Apple typically fights this sort of poaching with its brand, and that has worked very well for the company since it introduced the iPhone. More than a quarter of Apple’s global sales are made in China, and virtually all its iPhones are built there. But Apple pays Foxconn in dollars, so it gets no benefit from the devaluation, whereas Foxconn exchanges the dollars for yuan at a more favorable rate.

Short interest in Apple stock is likely to continue to rise until the company either articulates a response to the devaluation or the effects are shown when the company reports its fourth fiscal-quarter results in October. Shares traded down another 1.5% in Wednesday’s premarket session to $111.77, in a 52-week range of $95.18 to $134.54.

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