Commodity Trade Mantra

Posts Tagged ‘Yuan Devaluation’

The US Dollar Has Just Been Shanghaied By The G-20

The main meeting of the G-20 finance ministers and central bank governors was conducted with much publicity. A secret side meeting of a core group consisting of the US, Europe, Japan, China & IMF in Shanghai on Feb. 26, resulted in the biggest dollar take-down operation since the Plaza Accord of 1985 & will go down in history as a major turning point in the international monetary system.

Year-to-Date Gold Holds the Glory – How Long Can It Shine?

Gold prices are resilient & seem set for an interesting year as central banks exhaust their firepower. Gold ETF inflows have surged to the highest since 2009. Perhaps we may see some of the money flows rotate to the other precious metals as year to date, gold has had all the glory. With inflation yet at all time lows, uncertainty to the bullish outlook has increased & downside risks have crept up.

Emerging Market Meltdown May Plunge Global Economy Into Recession

When the Fed effectively telegraphed its new reaction function last month, the FOMC served notice to the world that it was not only acutely aware of what’s going on in emerging markets, but also extremely worried about the possibility that hiking rates could end up triggering something far worse than the “tantrum” that unfolded across EM in 2013.

Is China Quietly Targeting A 20% Yuan Devaluation?

Some Chinese agencies involved in economic affairs are assuming a much weaker yuan both over the near- and medium-term. Those projections, which suggest a depreciation of over 8% by Dec. 31 & about 20% by end of 2016, were adopted after the currency was devalued this month & compare with analysts’ forecasts for the yuan to reach 6.5 to the dollar by the end of this year.

China Injects Hundreds Of Billions In Liquidity To Offset Yuan Intervention

The PBoC injected CNY120 billion via 7-day reverse repos on Tuesday – that was triple the CNY40 billion injected late last week & CNY110 billion yuan in 14 banks today. As such, China resorted to devaluation but because the market expects the yuan to ultimately weaken by around 10%, the PBoC has been forced to manage expectations by supporting the yuan.

The Key to Understanding China's Devaluation Against the Dollar

By decoupling from the dollar now, China is sending a message that it may be prepared to let it fall later. This means that when the dollar starts to fall in earnest, China may not be there to catch it. This will also mean that the biggest foreign buyer of Treasury bonds will likely be unwilling to provide help when the U.S. needs China’s help the most.

China Destroys the “August is a Quiet Month Myth”

After a long period of pegging the Chinese yuan to the US dollar at about 6.1-to-1, China devalued the yuan in a sneak attack on August 11, devalued again Wednesday & Thursday. The total devaluation is almost 5%, the biggest devaluation in over 20 years. Normal daily volatility in foreign exchange markets is measured in 5 decimal places. 0.05% is a choppy day. 5.0% is an earthquake.

Chinese Devaluation Extends To 3rd Day - Yuan Hits 4 Year Low

Having devalued the Yuan fix by 3.5% in the last 2 days, China did it again, shifting Yuan to 4 year lows. While confusion reigns over why PBOC would intervene at the close to strengthen the Yuan last night, the reality is the commitment isn’t to a devaluation for China’s exports, but its actions are directed toward trying to keep the wholesale finance interfaces somewhat orderly.

China Currency Yuan Plunges Most In Over 5 Years, Biggest Weekly Loss Ever

Yuan has gone from being most attractive carry trade bet in EM to worst as PBOC efforts to weaken currency cause volatility to surge. Is PBOC’s engineering this CNY weakness a strategy to increase volatility & deter carry-trade malevolence or is it a more aggressive entry into the currency wars?

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