Not long until markets open in China today and we get to see where the RMB is going.
I posted yesterday on the flood of interest in the China movements: China – Yuan drop in the news. What’s going on?
And it is only intensifying.
Where are we at now? Views from around the desks and analysts:
- Fears are heightening that the yuan is nearing levels that could trigger an unwinding of leveraged bets on continued appreciation (it was viewed very much as a one-way bet on yuan appreciation, a view the PBOC is apparently trying now to dissuade). These positions (‘bets’) are huge
- The move has been pretty much confined to China markets (so far) … but further yuan declines risks contagion to other markets as funds scramble to cover China losses (And, just to be clear – this is not happening yet, it is a risk)
- There are those saying ‘keep this in perspective’, that the moves in the yuan are small (percentage wise), calls I respect but would caution that for the renmimbi these are large moves. Again, the trigger point for fear of ‘contagion’ into other markets has not been reached. I would think that the risk is low, given this move has been engineered by the PBOC and they’ll not want it to develop into some sort of crisis … but there is still a risk.
- While this short-term volatility is probably unwelcome to the carry traders, these actions from the PBOC are part of the bigger picture toward reform in China … a net positive
- 6.15 to 6.35 mentioned as areas where stops on the yuan trade could trigger
