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What Renminbi Float? PBoC Leaves USDCNY Unchanged, Weakens Yuan Versus Euro
Somebody forgot to give the PBoC the memo about that whole "PBoC eliminating the dollar peg" thing. According to the just released fixing by the Chinese Central bank, the USDCNY today was at 6.8275, the exact same as Monday. And adding just a little insult to injury, the PBoC devalued the CNY against the EUR by juar under 300 pips: from 8.4538 to 8.4825. That's ok though, the HFT brigade already has its wax on, er, risk on, no volume marching orders.
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Ty please... repond to my post and I'll stop... please! I really don't want to do this to your site dude!
http://www.zerohedge.com/forum/how-peacefully-overthrow-oligarchic-klept...
An obscure legislative procedure utilised creatively to regain control over the House of Representatives and the US government democratically!!! If I am correct (and occasionally I am...) They are fucked!!!
We need feedback now!!!
(I should have titled it "Why Gold will go to $5,000 next week!"... although the count is building quickly now... very quickly...)
a politician that says one thing and does the oppposite. that never happens.
The Chinese are doing their Obama impersonation.
The blender is on full tilt. Whatever strength the Euro finds tonight will be lost in a more sober moment later. Who knows what every move will look like, but the end result is clear. We're going to have rolling currency crises and the dollar is the prettiest whore.
The dollar is the most "whored" currency in FRL fiat currency land... therefore, counterintuitively, it will be te most susceptible to a strong bout of deflation...
If we have deflation, and I believe we do, the dollar-denominated debt holdings far outweigh any other currency. There will be a shortage of dollars to repay the debt and this will create demand for more dollars. This is dollar positive. My comments have nothing to do with the gross overspending policies of our government.
I agree; and a lot of the debt will be defaulted on which will eliminate debt dollars from circulation.
Thanks for the clarification... we are on the same page.
It is exactly what one would have expected and it would have been shocking if the Chinese had done anything else. Europe is their second biggest export market and this is a good way to show the ECB and the Americans that they are not the only ones that can fool woth currencies.
Mike Shedlock predicted the Yuan was more likely to devalue than appreciate.
Mish is confused about a lot of things.
Like basic math. The Chinese maintain their dollar peg by printing Yuan to buy up every dollar that comes into the country. What is going to happen when they stop printing those Yuan, and the Chinese people instead demand access to American goods or other things that can be bought with dollars?
We won't be exporting our inflation any longer, rather, it will likely all come crashing back onto our shores like the Tsunami from Deep Impact. We even have our own Morgan Freeman!
"Europe is their second biggest export market..."
No, Europe is their biggest export market. US comes second.
Everyone seems to think the RMB is undervalued, that is the crowded side of that trade. When there are that many people thinking the same thing, it is time for some sheep to get fleeced.
hahaha!! Thought this would happen...major headfake. China knows how to do 'em right.
Asian FX markets are up and down like a terlet seat on a fair day. I'm too chicken to join the party. Given that there aren't many reports due today and we didn't get much weekend 'bad news', I'd still guess we're gonna have green days across the board though, when all is said & done, and maybe I'll have to spend some time in the flagellation room tomorrow for not putting some longs in right now!
Has everyone in Washington DC lost the notion of "Realpolitik?" What makes them think the Chinese will do anything of the sort?
Yves post over at naked capitalism predicted this exact development. Moving to a target versus a basket of currencies is both a political and economic play to get favors from washington whilst quietly increasing exports to europe.
well done.
Chinese banks short on cash is causing China to offer above average yield on the most recent 3y5y bond offering. It was almost a failed auction [3y b/c 1.02 against average of 1.7, 5y b/c 1.06 against same average of 1.7]. This might be worth dissecting and this might also be a reason why the floating CNY was announced by not actually put forth. Also, the auction itself could have been an litmus test as to whether or not float the yuan. Someone take a look into it http://tiny.cc/n99zy
Tyler noted the interbank cash shortage in a piece recently:
http://www.zerohedge.com/article/china-1-month-interbank-rate-multi-year...
I know, but this isn't just unwillingness to free up cash for IB lending; this is general cash shortage withing CN banks, of which high IB rates are just a consequence. That or the uncertainty regarding the yuan would make the collateralization impossible. It could be both; I dont know; I'm not a Chinese banker; but if the unwillingness to free up cash which could get you non-deteriorating security which could serve as a collateral is any indicator; its the former; general cash shortage even more exemplified if the FX wipes 1% of available liquidity.
I cannot reconcile myself to a Chinese policy whereby they make their exports less competitive at a time of increasing wages and essentially create an economic situation where they will be "laying off' millions of low-skilled laborers at the lower ends of the wage scale. That is why the devaluation against the euro, and its soon to recommence decline, makes perfect sense to me. To say nothing of all the worthless real estate collateral the Chinese banks must be holding.
The only reason as to why China would even consider floating the Yuan is that the inflation rate/deflationary threat linked with the $ is not high enough/the probability of deflation is greater than the probability of inflation to keep the peg viable.
Its not just about exports and export competitiveness, its about maintaining the necessary increase in domestic prices; and if monetary policy regarding the dollar starts to pose a deflationary thereat to China [internally] floating Yuan is the best remedy tosuch illness.
Too much is at stake in China for deflation to even be considered as a possibility. This afternoon I have talked to many FX traders [both institutional and prop] and most of them think Yuan will appreciate against the dollar; and they are terribly wrong. It might appreciate in the short term, but PBoC will inflate and then [if necessary] hyper-inflate the supply by buying bonds or just suspending loan programs to various industrial sectors to misalign the equilibrium which is central to currency stability.
Yuan appreciation is a short term play; long term is massive devaluation [this inly goes if in fact PBoC expands the band from .5% to say 2% and allows volatility to set the FX withing this new fixed band]
Looks like they may have to dump some US bonds for cash. Hmm
The central bank promised to implement "dynamic management and adjustment," which could lead to the yuan falling, not just rising, against the dollar depending on how other currencies perform.
http://www.shanghaidaily.com/sp/article/2010/201006/20100621/article_440...
Cheeky, do you have a Question Mark key on your keyboard?? If so, then please use it.
Actually, I dont. Its broken [i shit you not]. I'm in the process of buying a new keyboard for about a year now. Still have to... you know... actually get one.
I don't think it should come as much of a shock that the Fix didn't move today. The Chinese in their announcement stated that "market supply and demand" would play a role in the determination of the CNY rate. There was no trading between the announcement and the Fix, hence no room to move the Fix. I'd expect that the PBoC Fixes the CNY higher tomorrow (wrongfooting everyone again in the process) and we get some front loaded appreciation of 3-5% over the coming several weeks.
Against which currency?
USDCNY
And now we know why Cramer was so bearish of late....
Talk about fucking up some perfectly good FX charts on a Sunday night. Back to some more Wall of Voodoo and piss on this....
We are afforded so many (short lived) opportunities to short this market ... sell now, be happy cause Judgement Day is right around the corner.
No shorting opportunity yet. Market has no reason to go down until after June. Everyone will chase this up for end of Q books. This currency news is exactly the bs they need to run it up.
Also, the market is pretty much Apple these days. Until it stumbles, it's our barometer. That darling doesn't look like it'll weaken any time soon. So, the market, up she goes for the time being.
You may be right about Apple (short RIMM for best play) ... but this market will go down when no one expects it to and then the HFTs, Props, and every buy and holder will try to get out at the same time. People are EXPECTING a fall but hoping for the best.
The Props are back working it ... ES 1124.50 at 23:47 with 1000 contract bids (then quickly withdrawn).
Is it not that for every 1% the Chinese let the Yuan appreciate the take about a $10bn knock on their $1trillion Treasury investments !!??
Cheeky, Hold the ALT key down and press 63 on the number pad of the keyboard, release the ALT key and that should generate a question mark.
DavidC
EURO buying support i've mentioned over the past few weeks has resulted in a bullish basing pattern on the daily chart. The important weekly chart remains bearish though.
http://stockmarket618.wordpress.com/about
Well, Tyler, looks like you spoke too soon. CNY up 0.45% against the dollar this morning.