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A Stunned Wall Street Reacts To China's Currency Devaluation
There is much stunned confusion among Wall Street's "best and brightest" following China's historic Yuan devaluation overnight which was predicted by exactly zero of said best and brightest, just like nobody expected the SNB to give up its own peg to the EUR in January.

The problem as the WSJ puts it, is that a devaluation for China is both good, and very bad. Good because it will help the struggling export sector, which has stalled amid weak global demand. Exports in July, for example, sank more than 8% and they were down nearly 1% for the first seven months of the year.
At the same time, it was essential for the People's Bank of China not to alarm domestic and foreign investors to avoid triggering a wave of capital outflows. Investors tend to dump a weakening currency and move their assets into other currencies. Thus, the PBOC said the move was a one-time reform effort to bring the yuan more in line with the markets.
That, of course, is a lie: the Fed's first QE was a "one-time" abnormal monetary intervention which has since become the de facto standard of every single central bank.
Finally, the central bank may also have had the International Monetary Fund in its sights. The yuan is up for possible inclusion in international agency's Special Drawing Rights, a basket of currencies that serves as a global reserve. Too big a move might have damaged Beijing's case that the yuan is a suitable candidate for addition to that basket of currencies, analysts said.
To show the many different and often opposing views, here is a summary of sellside views compiled by Zero Hedge and the WSJ:
The PBOC adjusted the CNY fixing mechanism, which prompted a step weakening in today’s fixing. From now on, FX market makers are asked to base their contribution to CNY fixing on: i) the closing FX rate in the previous day, ii) CNY supply-demand conditions, and iii) the movements of other major currencies. While public comments suggest this could be a one-off move, in our view it increases the uncertainty around the future path of the CNY, especially if closing FX rate significantly deviates from the fixing. In our view, the market’s previous expectations for a fairly stable CNY have seemingly been de-anchored by the surprising move today. Although information at this stage is limited, our current expectation is that the PBOC will likely use open market FX operations to try to reduce sharp volatilities and avoid further destabilizing the market’s CNY expectations in coming days.
- MK Tang, Goldman Sachs
The People's Bank of China shocked the market today by weakening the yuan reference rate in the largest single-day depreciation since the central bank's exchange rate reform on July 21, 2005. The PBOC statement interprets the depreciation as a one-off adjustment to fix the persistent discrepancy between the reference rate and the actual spot rate in the market. Since June, the yuan/dollar spot has been consistently about 1.5% higher than the daily fixing. The PBOC statement said that today's adjustment will fix the discrepancy, and going forward daily fixing will align more closely with the closing spot rate on the previous day. The strong appreciation of the yuan has put a lot of pressure on China's exports. It is unlikely that China will achieve the 6% trade growth target set for this year. Today's announcement is also a response to weakening currencies around the Asian region.
- Haibin Zhu, JPMorgan
The PBOC was hitting two birds with one stone: The PBOC's move will lead to a weaker yuan, lending support to export growth. It will also make the yuan exchange rate more market-determined, which could help China at the upcoming Special Drawing Rights review in November. In the past, one major problem with the yuan exchange rate setting was too much emphasis on its stability against the U.S. dollar while neglecting [trends in] other currencies. In the past 12 months, the yuan appreciated by 23% against the euro and 17% against the yen. As a result, so far this year, China's exports to the EU and Japan are down 4% and 11% year on year. Today's change should mitigate the problem. --Larry Hu, Macquarie Securities
We believe the unexpected devaluation today is more about the Special Drawing Rights bid rather than an intention to support exports. Tomorrow's fixing will be the key to test whether this devaluation of fixing is one-off event or a start of new fixing system. Our best guess is that it may be a one-off adjustment. Should it prove to be a one-off event, we think a combination of a widening of the yuan's daily trading band and a cut in the bank reserve requirement ratio is likely to be the next policy option to increase the yuan's flexibility. In the near term,
we may see more volatility ahead.
- Tommy Xie Dongming, OCBC
We think it unlikely that the Chinese government will let only market momentum drive the yuan exchange rate from now on, as that can be quite destabilizing. We think the government may still want to take a relatively cautious approach on the exchange rate front. The upcoming SDR review is one consideration, and avoiding destabilizing depreciation expectations and capital outflows would be a more important one. In this context , how China sets its daily fixing and manages foreign exchange market flows in the next few days will be very telling. Nevertheless, we do see today's move an important change in China's way of managing the exchange rate.
- Wang Tao and Donna Kwok, UBS
The People's Bank of China is finally acknowledging that the yuan has appreciated excessively in real effective terms, given the sharp depreciation of the euro and the yen. Such real exchange rate appreciation is clearly one of the key reasons for the extremely weak July export data published last weekend and must have pushed the PBOC to use one of its most powerful instruments to reboot the Chinese economy: the exchange rate. China has been losing competitiveness in third markets in an aggressive way. However, we believe that the PBOC will not dare let the yuan depreciate too rapidly or too aggressively. Moderate capital outflows have been the norm during the last few months to the point that China has nearly $350 billion less in foreign exchange reserves from a peak of $3.99 trillion. A rapid yuan depreciation would only feed additional capital outflows, putting additional pressure on the PBOC.
- Alicia Garcia Herrero, Natixis
The central bank has described this as a way to help exporters and said it is a one-off move. But that puts the central bank's credibility on the line. The risk is that the move isn't large enough. I don't think the 2% adjustment does very much.
- Andrew Polk, Conference Board economist
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The Fed has our back...no problem. I'd expect a statement by one of them shortly saying they may not raise rates in September. It's all Bullshit!!!
Insert deer in headlights photo here.
China's first response as a "Thank You" for Washington's, sorry I meant the IMF's decision not to allow CNY into the SDR Club?
Nothing to look here folks. Just keep drinking your cool-aid and shop till ya drop.
The decision to devaluate the Yuan is likely due to weakening export orders and the (perceived) need to insulate the Chinese economy from an expected USD rise.
"which was predicted by exactly zero of said best and brightest"
including ZH
http://www.zerohedge.com/news/2015-03-06/how-beijing-responding-soaring-...
5 months warning not enough lead time for you, Skippy?
touche
It's just the beginning. The dollar is up 16% in the last year so the pegged yuan has followed it up the slope. A 2% percent adjustment fixes it? I think not.
Nice catch. From your link:
The punchline: devaluation may be imminent:
Pay attention, read only and don't post anything till you check it.
Pay attention, read only and don't post anything till you check it.
Whaddaya expect from a guy who uses the Confederate flag for his icon?
And if you like your Bullshit!!!, You can keep your Bullshit!!!
1.9% or approx 2% change in USDCNH and people are going wild!
Has anyone seen what the depreciation in the last few years has been in various countries:
Brazil: 52.05% and 96.38% in 5 years!
South Africa: 18.46% in 1 year 75% in 5 years!
I know. Cracks me up. The Yuan is PEGGED to the USD. In a narrow range. WTF. Wake me up when they remove the peg.
I believe this is the FINAL ACT to bring the Sheeple into the USD and then let it go down in Sept 2015 with a massive global meltdown!
Mean no disrespect, but u wanna bet?
Sept 2015 will be a non event.
Might even see a return to new index highs when the Jewish mafia returns to God's work by the beginning of October.
Butt for sure, a global meltdown is impossible when a few Zionist Jews control every fianncial nexus in the world.
You'll thank me in October if you DO NOT short the markets.
Once the recognition of the declines in the percentages noted here by astute ZHers, becomes generally known, the best (for the shorts) has already happened, only scraps remain.
You should be wrong, but I think you are right.
The Banks lost control of the government (USA) and got Glass Steagal in the US Great Depression.
A) The don't want to chance that if they can simply foreclose on PIIGENS (Added UK & Nederlands to PIIGS), and they get detroit, Chicago, Porto Rico, and part of Califoria businesses and municipalities... boiling frog approach
B) Although bankers probably practice getting mean and angry for negotiations... they have lots of USD Investments and no other place to put their money other than collapsed assets if they crash the country, but debt & consumption would need 25 years to come back
C) I have to consider that Sub-prime mortgage crisis and derivatives crisis in 2008 was planned for over a decade with intent to cripple foreign banks and make TBTF Bigger and Wealthier... There could be a plan for a Sept Crash of Western/Global markets... but it could be 10 times worse since the damage was assuaged so well in 2008-2010 that most of what comes to mind is wealth transfer, wealth lost, home ownership decline, pension solvency, municipal debt problems, loss of full time jobs and compensation, and stronger federal government and TBTF Power over the country... meaning things are not so bad yet that the Bankers would not try another global crash to consolidate more wealth and power.
Hmmm
I get where you're going, but remember: fiat is not wealth. It's the illusion of wealth. And the banksters, being the creators of the illusion, are completely aware of this. They are creating fiat hand over fist, and using it to acquire legal ownership of real wealth: land, commodities, etc.
When they believe that they hold sufficient legal contracts to claim ownership of the entire world, the trillions (quadrillions?) of fiat dollars will be allowed to disappear; they are only a means to an end, to their creators. Governments will collapse, their sovereignty ceded to the banksters, much as the deed to a house is ceded in foreclosure.
The banksters (and their industrialist cronies) will be left with all the real wealth, and those of us whose net worth is expressed solely in fiat will be instantly rendered destitute. Even those individuals who own land - how will they pay property taxes? Everyone will have their property seized.
The UN becomes the world government, ushering in the NWO.
The IMF and World Bank become the global version of the Fed.
The new Chinese IMF-style bank will be absorbed into the IMF/WB structure. China has merely done this to assure themselves a prominent seat at the new global "round table" of banksterism.
No one is allowed to own property. Instead, all of the land on Earth will fall under UN control. (Plank #1)
And the UN will be firmly under the thumb of the IMF/WB - because they control the money supply. (Plank #5) Therefore, the banksters, while technically owning nothing, will actually control EVERYTHING. And control > ownership.
And the neo-feudal global plantation will be a fact. ("Workers of the world unite!")
This is the plan. It has been for centuries. I do not believe we will see the financial collapse everyone here is expecting for a few more years, at the earliest. Because that collapse will be the final foreclosure on Earth and humanity, by the psychopaths.
Humanity has a choice to make. We can throw off the shackles of the psychopaths, or we can go gently into that long night of serfdom.
The Jesuits
the only ones worthy to do an exorcism
you might want to check the mirrors in your house there could be some Joos watching you through a double sided mirror. what a douche. you don't have to go with your stupid cockeyed theories when the most simple explanation will do. people love power and power corrupts no matter the color of their skin, religion or geographical location. been going on long before the Joos showed up.
We shall see. I think it quite possible that there is NO CHOICE to the psychopaths BUT to crash the market in September. Part of their sick game is to tell us what they are going to do, get the tacit consent when no one pushes back, then fuck us all over.
The seven year cycle of Shmita should be coming to a climax in September -- 4th Blood Moon, Jubillee, Pope coming to visit the USA, a lot of stuff happening simultaneously.
Perhaps this is all bunk. Perhaps this is a head-fake. But the way the financial world is run cannot continue indefinitely. TPTB prefer controlled demolitions, things they can get ahead of and profit from. They won't let this go until it collapses on its own, because then there is less of a chance to profit from it. And September seems to have all the markings of warning to those of us paying attention.
Which is a very, very, very small percentage of the population. Evelyn Rothschld could put out a press release today proclaiming a huge bankster scheme to crash the markets and profit beforehand, and most wouldn't hear of it or know or understand.
For the people at the very, very top of things, this is FUN for them. All part of the game. Like mean-spirited kids who burn ants with a magnifying glass. It's time for another reset. September. Get ready.
Hey Comte...I am willing to take a bet....what say? 100 bucks?
Because I am 90% sure that there is going to be an 'event'. I do not know how, what, when and where?, but I know that it will lead to a financial catastrophe!
Last few days, almost all indicators are blinking red.
The same Jews controlled the same financial system in Sep 2008....in Sept 2001...in Oct 1994...in Oct 1987.....in Oct 1980.....and in Oct 1973 as well!
However, their power in percentage of the world or that of the US population was even greater than it is today, yet they refuse to let go and now are in the mother of all 7 year heralding a Jubilee!
How do we set and execute the bet?
That quickly? Europe is still kicking.
"Nobody believed they would devalue. This is crazy shit. Buy more stawks!"
Sum Ting Wong, Merrill Lynch
Russian Ruble is down 74% in 1 year and 111.25% in 5 years!
Malaysian Ringgitt is down 22.31% in 1 year and 25.09% in 5 years!
Indonesia is 14.54% in 1 year and 51.16% in 5 years!
Australia: 25.15% in 1 year and 23.88% in 5 years1
Canada: 19.16% down in 1 year and 26.4% in 5 years!
While the Chinese Yuan has depreciated 0.46% in 1 year and APPRECIATED in 5 years by 8.33%!
All the Western media is biased and talking crap as they prep the world and all the sheeple to go under the bus!
This is a the true Financial False Flag in preparation of a a bigger 'surprise' US interest rate hike to come, and all the stupid ANALcysts will say, they could not see the Black Swan coming!
The warning is there, all major stocks like IBM, Apple, Marubeni, Hitachi, Siemens, Caterpillar, Sandisk, Intel, Viacom, CBS etc are down, ALL commodities are down....the US rate hike will be THE PERFECT EXCUSE to execute the perfect financial meltdown and rob the poor and enrich the Rich, all over again!
But those other countries don't matter. China....the engine of world Growth, made of brittle porcelain china?
The world economy is something far worse than broken and to maintain denial, we have been forced to look elsewhere for our confidence model. China, so large and growing has survived this status by it internal miracles driven by the faking of numbers and suspended reality. Any cracks in that facade is terminal.
What do you mean, that the girl who has been giving me the eye from across the bar, is actually a guy??
It can be hell when the lights come on.
Sweet Loretta Martin thought she was a women, but, she was another man, all the girls around her said she's got it coming, but, she gets it while she can.
get back to where you once belonged
Those countries are a drop in the bucket compared to Chinese exports.
Apples...Oranges...
It isn't the size of the devaluation, since the Yuan isn't floating. It's the fact that it moved at all, since many schemes were set up based on a stable rate of around 6.15 to 6.20. All those plans are now dead.
Bye bye SDR, we were only playing you for time to setup our own system.
Honor among psychopaths, on your bike.
Things are getting frantic! Just like they are supposed to. The turd spins faster as it goes down the bowl.
Au & Ag, along with the miners are looking good right now.
The herding continues.
I contend that there is no place to go. Every escape avenue is actually another trap. Asset capture.
Do we think they have spent the effort to create a simultaneous world financial collapse and still allow a real escape route?
Not all is lost OW, there is still "guns and ammo". And if you can, a trip to the local mosque to pick up some RPG's might help........
Grimaldus
Got it covered, but at this rate senility will take me first.
You should count yourself lucky if senility takes you before you get to see the final stages of what this economic world will eventually devolve into.
I would feel very lucky if I can die an old man with no major outbreak of worldwide turmoil(war or otherwise) in my lifetime...
It would probably make more sense for the Chinese to have kept the peg where it is - and use their assets to attacking and lower the U.S. Dollar. Things will get real interesting if the Fed raises now!
Manipulated!!
Have to agree that the PBOC will have to repeat the performance. Should they depeg, they no longer have control over the exchange rate. They'll eventually have to cave to market demands.
The old advice:
"Sell in May and go away.
Stunned? Wonder. GS runs PBOC anyway, via their proxies, so hard to imagine that this is a true surprise.
Doesent Donald Trump always talk about China manipulating their currency?? Why does the media never talk about this??
'cause the media is owned by the same entity that are the true owners of this form of China.
Because they know that most Americans have no idea what a peg is, how inflation is exported, or any interest in anything beyond how smooth Cait's balls are now.
peg bundy was alluring
Kelly was the one that I wanted to bend over.
So many people get paid a lot of money to be surprised all the time. I'm sure when the FED starts QE4 all the geniuses will be shocked.
This is just the beginning.
Lets be realistic. This Yuan move was not very big. It was puny. It is not even matching what the USD does in any given week. As I look at the ticker, it went from 6.21 to 6.31.
This appears to be another move in the direction of the final shakedown which has the potential to be very uncontrolled. Let the chips fall where they may is a figure of speech which means, "What happens happens" or "Let the imminent events unfold." This metaphoric term dates back to the 1800s and alludes to chopping wood. However, several factors determine just how much influence can be applied to the the final outcome of current economic policies.
Using the metaphor of "falling chips." Things like the size of the chips, the rate or speed at which they fall, and the number of chips in the air may make them uncontrollable. In my opinion luck and caution will impact our individual fortunes as we move through the financially violent period before us. Below are more thoughts concerning the idea our economic overlords have lost control of the game.
http://brucewilds.blogspot.com/2015/08/the-final-shakedown-will-be-uncontrolled.html
Why now? Just before the sdr basket. I would say preliminary negotiations will cap them at a certain value and the timing is to try to get more currency in the basket.
PBOC Yuan Daily Fixing Rate is mentioned here as if the Yuan Floats in the Free Market.
Hm... Communist Propaganda?
Looks like movement from 6.12 to 6.23 or 11 Cents.
Seems like a stable movement to me, but I'm not an FX Trader.
So the point is that money is fleeing Yuan to US Treasuries?? And that Chinese Exports will be cheaper. And that many countries are debasing their own currency in a kind of cold currency war.
Investors dump assets from weakening currencies? WTF? Has nobody been paying attention to the stock, bond, art, and high-end real estate markets as the Federal Reserve has been butchering our currency?
The US could simply announce a 5 trillion dollar QE 4 that will go directly to taxpayers in the form of all student loans paid off, no federal taxes for a year, and checks of 100K to 500K to every tax filer, offset by the elimination of Social Security and Medicaid except for the truly disabled. And Don't tell me about hyperinflation when the last 50 trillion didn't cause it, and most of the world's population has only known fiat and king dollar, in addition to money being extremely scarce. Who's gonna lose confidence in it?
People who don't focus on the thin air money being created to benefit only some people only perpetuate the legitimacy and lawlessness of the oligarchy. Whether the printing press is right or wrong doesn't matter, if I'm the one that gives it power, I'm not going to eat stale bread while you eat king crab and steak tartare. Shortsighted and immoral or not, me going along with that and not demanding to be cut in on the scam only validates my second class status.
Give every American tax filer six figures and China and Germany and the EU will throw a PARTY. It's the right prescription per the system we have, and I find it very hard to believe no one in the halls of power has thought of this. You don't have to AIM for collapse and wwlll and global suffering and poverty.
Don't forget free health care for everyone. You don't need insurance or even any ID, just go to the doctor, he treats you, submits a bill to the government, and is automatically paid. Print, baby, print!
Try to paint me as a commie all you want, I made myself clear. The fact remains that we have currency that can be printed from thin air in infinite amounts. We agreed in the beginning to not abuse that power, supposedly in order to maintain confidence in the currency. The Fed has openly violated that, publicly since 2008, and god knows how much secretly in the decades before. In order for fairness to be restored, either THE SAME AMOUNT PROPORTIONALLY be printed and given to all taxpayers (which I still didn't even suggest) or every motherf-cker that received or directly benefitted from this TARP money needs to be stripped of all assets and the executives of the TBTF banks and corporations need to be executed. Their economy doesn't function, it runs on injections of funny money, because we're too tapped out to take on the debt to make it work. If its good enough for their economy, then it's good enough for the Main St economy.
From 2014: Yuan Plunge On Tuesday; Anybody Watching the Yuan Price of Gold Besides 1.3 Billion Chinese?
There are links to folks predicting yuan devaluation years ago, such as Andy Xie and ALbert Edwards. It has taken longer than expected, but it was always inevitable.
If China is building militarty bases on man made islands in the South China Sea that the USA doesn't like, why would the USA let them in the SDR??
They get in the SDR no matter what, just like Greece gets the bailout, no matter what.
By devaluing their currency, it takes a little pressure off the USD which the Chinese can quietly sell a few more off now without causing alarm.
I gotta say, some very strange things have been going on with this iPad. Can't tell if it's my commenting history or a virus or if both are related or what. I know what Snowden said about this device, but I done gave up trying to hide. If I'm getting crushed and all of my life's potential is being squandered with most avenues for it to manifest itself choked off, you can't deny me an outlet to express that.
"The yuan is up for possible inclusion in international agency's Special Drawing Rights"
Possible being the operative word here. The IMF has already denied the Yuan or RMB inclusion into the SDR. First by cancelling their preliminary meeting a fews months back and then recently by pushing the scheduled meeting from Sept of this year to Sept of 2016. If anyone thinks that the IMF ( a de facto agency of the USA) will allow any meeting to occur and any change to the SDR and allow any threat to the Federal Reserve debt note aka the US Dollar as World Reserve currency smack in the middle of a Presidential Election you are deluding yourselves.
No, the writing is on the wall, the RMB or Yuan will NEVER be allowed into the SDR. The devaluation is just another shot in the ongoing and escalating Currency War.
Next up, sabre rattling and war mongering from the ever more desperate American Neo-Con power structure in the form of a South China Sea military incursions using Japan as a fig leaf.
Trade War=Currency War=Hot War
This funny !
All those guys above are wrong.
A currency has hardly any meaning to a economy...(. if its sound money, otherwis it will be destructive.)
The existence of clearing systems is a prove of statement.
But we can learn from the greek tragedy.
Mises says:
https://mises.org/library/four-economic-myths-perpetuate-euro-crisis
So you better print this.