PBOC Slams Yuan Shorts Again - Strengthens Currency Most Since 2005

Tyler Durden's picture

It appears the messaging from The People's Bank Of China to The Fed was heard loud and understood. Having exercised its will to weaken the Yuan (implying turmoil is possible), Janet Yellen delivered the dovish goods and so China 'allowed' the Yuan to rally back. In a double-whammy for everyone involved the biggest 3-day strengthening of the Yuan fix since 2005 also pushed Yuan forwards back to their richest relative to spot since Aug 2014 - once again showing their might against the dastardly speculative shorts.

As we warned previously, it appeared a 'message' was being sent to The Fed via Yuan weakness  - first ahead of The FOMC meeting and then, as several hawks got vocal, ahead of Janet's speech. Her uber-dovishness was rewarded as China 'allowed' the Yuan to rise and thus the USDollar to weaken...

 

And since Janet delivered, PBOC has strengthened the Yuan Fix by the most since 2005!!

 

Crushing shorts as Yuan forwards collapse back to their 'richest' relative to spot since Aug 2014...

 

And just like Keyser Soze, they were gone. So while the old mantra of "Don't fight The Fed" may apply to some, it most certainly does not apply to The PBOC...

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max2205's picture

Fd gave them the play book 

knukles's picture

"Well, Jane, it just goes to show you, it's always something — if it ain't one thing, it's another.  One day they tighten, the next day they loosen, one day they make it go up, another day they make it go down.  I don't think they know anymore whatthefuck they're doing than you do, Jane"
                                              - Roseanna Roseanna Dannna (kinda)

El Oregonian's picture

"We'd like to thank you folks for flying with us today. And, the next time you get the insane urge to go blasting through the markets in a pressurized mental dementia-condition, we hope you'll think of us here at Federal Reserve Airways."

Enjoy your slide...er, ride...

back to basics's picture

"As we warned previously, it appeared a 'message' was being sent to The Fed via Yuan weakness"

Get a clue ZH, there was no message sent by the PBoC to the FED or anyone else for that matter. These moves are pre-agreed and coordinated between ALL the major central banks.

For a truth site, sometimes you miss the forest because of the trees, or perhaps you didn't miss it but telling it like it is in this case is in conflict with the "as we warned previously" constant theme on here.

This is the fight club, yes?

samjam7's picture

What's the point in devaluaing before Yellen's speech and revaluing right after? You seem to make it really easy for yourself.

pitz's picture

They're 'trying' to devalue but the market is telling them that sustainable devaluation is impossible.

 

oncemore's picture

can you [please point me to any evidence of fixing between PBOC  and FED please? thx.

 

"Get a clue ZH, there was no message sent by the PBoC to the FED or anyone else for that matter. These moves are pre-agreed and coordinated between ALL the major central banks."

back to basics's picture

I can't provide you with any "evidence" that the FED steps in and buys the S&P whenever the market is ready to breach critical resistance levels and head sharply lower but I know it's taking place.

It's called critical thinking by the way, may be you've heard of it, sort of like trying to figure out on your own why a 50 story skyscraper which wasn't hit by a plane collapses in free fall on its own footprint. No "evidence" there either.

Take the blue pill and go back to sleep.

SoDamnMad's picture

knukles

Gilda Radner was fantastic and her untimely death was  huge loss to those who love to laugh through comedy.

Thanks for not forgetting and applying her humor. I hope she is sitting on a cloud somehere up high writing

ZH sarc.   (Can you imagine her ripping up Hitlery?)

Groundhog Day's picture

I just hope the chinese take out the likes of soros, hayman et al before they fall apart.  would be hilarious to watch.  They though they could beat the rigged casino

RSDallas's picture

Ladies and Gentlemen,

Wake up and smell the filth!

Yen Cross's picture

   Hahh-hahh. I guess opening that exploratory,  usd/jpy long trade, wasn't entirely re3tarded?

Seasmoke's picture

Looks like it is confirmed. Mr. Yellen is China's whore.

Spitzer's picture

Hows shorting a creditor currency with the debtor currency working for you dumb cunts Soros et al ?

conscious being's picture

I like that Spitzer. That kind of could have been the article.

ebworthen's picture

Don't buy electronics until they slam the Yuan again.

"Baffle 'em with bullshit" the Central Bankster game.

Death to Central Banks, the Elites, and the Moneychangers!

Dragon HAwk's picture

So I take it Soros, never Played the game of Go, when he was a Kid ripping off Gold from his People.

SpasticGramps's picture

Bass? Bass? Kyle, Bueller? Bueller?

Kind of like his GM call from years ago. I never understood him picking that stock.

Don't get me wrong I like the guy. Feel for him. As much as I can for a billionaire.

Spitzer's picture

Its unreal how clueless these guys are. Hugh Hendry has this right. He's on the other side.

 

back to basics's picture

Hugh Hendry is a pseudo intellectual that has done nothing but lose money for his fund, and at this point I don't think he even has a clue what side he is on.

Ghordius's picture

I beg to differ. Hugh Hendry is a financial expert leading a hedge fund. imo he has an extremely clear idea on which side he is on: his

further, no derivatives means no hedge funds. so I also have an extremely clear idea on which side he isn't: mine

then if I could, I would abolish immediately all the post-1999 derivatives which I regard as a financial abomination, and make me regard hedge funds as tentacles of megabanks, the other abomination of the modern "financial industry"

Groundhog Day's picture

I don't feel for any of them.  They take billions from others, jet trek around the world to places like davos on thier clients dime, host parties on ranches with other managers like themselves touting how smart they are.. Fuck em all.  

Huckleberry Finn from Texas's picture
Huckleberry Finn from Texas (not verified) Mar 30, 2016 10:51 PM

I don't why ZH gets so surprised every time this happens, like it is some giant conspiracy theory. They are adjusting it every time the dollar weakens significantly againist the Euro or Yen. All this massive devaluation which Kyle "Bass to mouth" was calling for only stood a chance if the Fed raised rates meeting after meeting, driving the USD index to 120. Not gonna happen.

Dangerclose's picture

I think you have it backwards. A weaker dollar means a stronger yuan and this forces PBOC to adjust the peg to weaken it relatively. A stronger yuan means the PBOC will burn through their US dollar reserves faster which is why Kyle Bass is screaming from the rooftops what is the obvious outcome, a drastic devaluation via the peg. Get it?

Global Observer's picture

 

I think you have it backwards.

You have it backwards. China is a net-exporter. Which means the only way for China's foreign currency reserves to be depleted is for a panic out of the CNY. There will be no panic out of the CNY as long as the CNY is strong. Kyle Bass is a self-important imbecile who thought he could create a panic in China, by declaring he is going to short the CNY. The PBoC by fixing the CNY higher will bankrupt everyone betting against it. The only way the retards betting against the CNY will avoid a bankruptcy is if they have the Fed or the US government making good their losses betting against the CNY.

back to basics's picture

"You have it backwards."

Let me guess, you are a China bull

"China is a net-exporter. Which means the only way for China's foreign currency reserves to be depleted is for a panic out of the CNY."

Wrong. China foreign reserves can be depleted by merely trying to plug the massive hole of defaults in its insane shadow banking system. ***THATS WHY*** smart capital is fleeing China. Besides, stay in China to invest in what exactly, massive over-capacity in everything.

"There will be no panic out of the CNY as long as the CNY is strong."

I'd re-think that premise if I were you. Once the realization sets in that corporate profits are sinking and that we are in the cusp of an unprecedented global recession (perhaps you thought oil is where it's at because the Saudis wanted to break shale and that we wanted to bankrupt the Russians), protectionism will arrive and China's export model, despite banker protestations, will be dead. All there would be left is massive overcapacity and an avalanche of defaults. Smart money is already getting out without trying to create a panic.

"Kyle Bass is a self-important imbecile who thought he could create a panic in China, by declaring he is going to short the CNY."

He is an imbecile alright, but not for the reason you think. It's for thinking the US is in good shape.

"The PBoC by fixing the CNY higher will bankrupt everyone betting against it. The only way the retards betting against the CNY will avoid a bankruptcy is if they have the Fed or the US government making good their losses betting against the CNY."

Blah, blah, blah

pitz's picture

"Wrong. China foreign reserves can be depleted by merely trying to plug the massive hole of defaults in its insane shadow banking system. ***THATS WHY*** smart capital is fleeing China. Besides, stay in China to invest in what exactly, massive over-capacity in everything."

 

Internal defaults in Yuan are highly deflationary to the Chinese currency, and will truncate imports.  Strengthening the Yuan even more.  Defaults in Yuan debt absolutely wouldn't even begin to touch the forex reserve position.  After all, Yuan debt is repaid in  Yuan and losses are in Yuan. 

The previous poster is right, Kyle Bass et al will be smokin holes in the ground once this  is all done.  Net exporters cannot sustainably devalue in a currency war.  They are the proverbial "losers" when it comes to sustainable devaluation.  But ironically, being a "loser" actually means you're a winner at this game. 

conscious being's picture

Agree. He's confusing internal money with external foreign currency reserves that you can buy stuff with as long as markets are standing. After which you have a new currency system. Internal money problems, if any, can be delt with.

back to basics's picture

You probably don't realize it but you just made Kyle Bass's point.

If you understood how "internal money problems" can be dealt with, you'd understand what Kyle is saying. Evidently you don't.

Global Observer's picture

 

Wrong. China foreign reserves can be depleted by merely trying to plug the massive hole of defaults in its insane shadow banking system. ***THATS WHY*** smart capital is fleeing China. Besides, stay in China to invest in what exactly, massive over-capacity in everything.

Withdrawal of USD 22.5 billion (the total FDI in China as of March 2016) from a reserve pool of USD 3 trillion is going to "deplete" it? Keep up those impressive arithmatic skills.

Ghordius's picture

Global Observer

do you have dependable data? some sources say one thing, others, including the Financial Times, calculated in February with some 100 billion per month, and a PBoC FX reserve pool of 2'400 billions

further, it's completely unclear to me where those 100 billions per month would go. up to now, the best explanation is a FED trick of calling them reverse repos with the PBoC

which, btw, would mean that the FED is monetizing, doing a QE... "for China only"

so... do you have dependable data? considering that neither the PBoC nor the FED are known for telling the whole truth and nothing else then the truth?

in the last years, the phenomenon of Chinese smart money "fleeing" China is, in my view and what I can see, a fact, not a conjecture

up to a certain point, it's both natural and to be expected. nobody is likely to make a huge whopping fresh load of money... and not diversify the freshly aquired portfolio. diversification is "natural", particularly for big portfolios which are mostly in countries that have no history of being very dependable in protecting private and personal wealth. and China is still nominally a communist country under the benevolent dictatorship of a avant-garde one-party-only

pitz's picture

Indeed.  There's huge worldwide demand for Yuan to buy all the stuff China exports.  And China's productive overseas holdings will create Yuan demand as well as profits are repatriated to China. 

Plus, if Yuan ends up being a significant part of worldwide forex reserves, which it should over time on account of China's robust export capacity, China will benefit from the seignorage.

China is obviously on the cusp of massive internal asset deflation, and asset deflation is almost always currency positive.  China being able to sustainably devalue is nothing but a delusion. 

Dangerclose's picture

and asset deflation is almost always currency positive.

 

Sure? Look at Canada's looney and tell me how that is going.

pitz's picture

Not much asset deflation in Canada *yet*.  RE prices, for instance, are barely down from the 2013 peak. 

Dangerclose's picture

The chinese elites are already buying everything up along the east coast of north america just to get around capital controls. As the yuan gets stronger against a weaker dollar, that is only going to accelerate. The Chinese do not like having to give so much of their dollars (reserves) for the yuan. They truly want to devalue so they can export more and save their reserves. The problem is that their system has become an "impossible trinity".

https://en.wikipedia.org/wiki/Impossible_trinity

Dangerclose's picture

This is tough on those short the yuan but Yellen isn't doing the PBOC any favors. Yuan strength only means quicker and stronger capital outflows. Say what you want about Kyle Bass, but he has the foresight to see PBOC's only option whether they want to admit it or not.

Global Observer's picture

 

Yuan strength only means quicker and stronger capital outflows.

It is the exact opposite. A strong Yuan means capital stays in China.

Say what you want about Kyle Bass

He is a moron.

pitz's picture

Not only that, but China is generating massive amounts of its own capital.  The western-centric media call China's investment overseas "outflows", but in reality, its China "pac-man"-ing prime assets around the world "on the cheap". 

SpasticGramps's picture

Trust me. I like Bass. He's a smart cat. Smarter and with more money than I for sure.

But, the 08 crisis may have been a carrot stick for the "petite-bourgeois" 1%. An enticement to keep playing the game.

The question is can the PBOC keep the wool over everyone's eyes before Hayman, Heyman, Hyman, Heimlich Capital becomes insolvent this time. These "foresight" guys you have made a killing shorting central bank retardness the past decades now have to deal with unlimited helicopter money everywhere.

It's a deathmatch. Too bad they don't have that show on comedy central anymore.

bid the soldiers shoot's picture

Maybe when he announced his short position, Bass was really long.

And now he just made another killing.

RopeADope's picture

Two men jump out of an airplane without parachutes and argue about who will hit the ground first.

That is what this is.

Soul Glow's picture

When the dollar is controlled by the Fed, watch out!

Anything is possible.

conscious being's picture

True, but the grip is slipping. Like this is good news.

Latvian led social media company hosts Jihadi recruitment material, routing fighters from Europe to [fight against Russia' ally] Syria, has been put under new management - BBC [of all places?]

FranSix's picture

This is not the currency collapse you were thinking of. /JEDI mind trick

Davidduke2000's picture

All these people still playing the market, the bonds and  FX are going to lose their shirt as the markets are rigged by central bankers and the chinese central bank is as corrupt as the US, EU and Japan, they print fake money and act like rich diluting the people's money.