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Intraday USDCNY Unchanged Since 2006

Tyler Durden's picture




 

Inspired by recent work at the China Economics Seminar, we were shocked at the recent shifts in USDCNY. While all has been calmly proceeding in the right direction from US perspectives with CNY appreciation (though maybe not fast enough for Chuck Schumer's liking), under the surface there is what appears to be a fierce battle between market participants and the PBoC. By breaking down the cumulative shift in USDCNY into intraday 'market/trading' movements (from fixing to close) and interday 'government-assisted' movements (from prior close to fixing), we can draw some perspective on what the market is trying to do and what the government is doing. Evidently from the chart, the outward appearance that CNY appreciation is slowly but surely occurring (the green line) is misleading, the clear signal is a market trading the USD higher (helped by European angst) and a PBoC massively intervening.

 

 

Incredibly, since the fixings began consistently in Jan 2006, intraday cumulative moves are now exactly ZERO at the close on Friday (red line), with the entire move higher in CNY now accounted for over the past five years by the PBoC's actions (blue line). Furthermore, the shifts of the last four months are on a scale we have not seen before making us wonder just how many USD are being sold out of Chinese reserves into the market to stabilize the CNY?

 

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Sat, 12/24/2011 - 20:05 | 2009615 homer8043
homer8043's picture

Exactly which race was Sun Tzu descended from?

Sat, 12/24/2011 - 20:13 | 2009621 Conrad Murray
Conrad Murray's picture

Half serpent, half woman. I think we all know what that means.

Sun, 12/25/2011 - 03:13 | 2009953 Cast Iron Skillet
Cast Iron Skillet's picture

one-eyed snake likes woman, yes!

Sat, 12/24/2011 - 22:26 | 2009679 xela2200
xela2200's picture

Same as Confucius.

http://en.wikipedia.org/wiki/Confucius

 

Confucianism is the official ideology of China.

http://en.wikipedia.org/wiki/Confucianism

 

From which the government sponsored Confucius Institutes arises.

The proliferation of Confucius Institutes around the world has multiple purposes: the promotion and teaching of Chinese culture and language abroad, the encouraging of trade tries, and the extension of the Chinese Party-State's campaign of "soft power" into the educational sphere in foreign countries.

Which has met with opposition from many so called open societies like in the US.

http://en.wikipedia.org/wiki/Confucius_Institute

====================================

Therefore, Although sun tzu was Chinese, they might not be the war mongering people that our politicians have made them out to be. They are just fighting the same guys that are trying to screw us all. Except, the Chinese have been getting screwed for a few more centuries, so they know the score by now.

If sun tzu was alive today, He would probably have taken advantage of the gold decline to load up (selling worthless bonds at their peak) and beat the screwers at their own game . I wouldn't be surprise if they were doing some x-mas shopping to better fund the Pacific Asian Gold Exchange that is coming live in the next few weeks.  Get ready for some serious arbitrage as PAGE will have a spot backed by REAL gold (no lending games). Yes, the PAGE is allowing foreign brokers to open accounts also. So first They take all the gold from bankers that had to sell to remain solvent, and then they will smack the short position (JPM) through arbitrage. Yeap that is what Sun Tzu would have done.

Check the last 3 paragraphs of this link. Even Russia is taking a piece of the action. While our politicians are bickering about a bs extension, the Chinese and the Russians are blasting us in the incredible form this currency war is been fought.

http://www.silvergoldsilver.com/index.php?option=com_content&task=view&id=307&Itemid=9

 

Merr X-mas financial guerilleros.

Sat, 12/24/2011 - 20:19 | 2009624 bahaar
bahaar's picture

What does this mean?  That China's actually defending it's currency for a change?

Sat, 12/24/2011 - 21:33 | 2009669 midtowng
midtowng's picture

What do you mean "for a change"? When have they ever stopped?

Sat, 12/24/2011 - 20:23 | 2009627 CreativeDestructor
CreativeDestructor's picture

Chinese USD selling is nowhere near enough to make any effect on USG yields yet. But I suspect levees will crack soon...

Sat, 12/24/2011 - 20:45 | 2009637 ucsbcanuck
ucsbcanuck's picture

Smart move on both Russia's and China's part - sell out of US Treasuries at the peak while everyone else is buying them up, and put the USDs into real assets. Russia has already dumped around 40 - 50% of its Treasury holdings. Does anyone know how much China has dumped?

Sat, 12/24/2011 - 21:00 | 2009650 Stagflationary
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15% or less. 

Sun, 12/25/2011 - 11:56 | 2010313 ucsbcanuck
ucsbcanuck's picture

OK, thanks. I'm sure that number is going to go up slowly - there's enough desperation out there for China to take advantage of.

Sat, 12/24/2011 - 20:54 | 2009645 Ecoman11
Ecoman11's picture

It appears to me that China is ready to purge its housing bubble and let the yuan appreciate 3-5% per year to stimulate domestic consumption and to stabilize Asian OCR (optimum currency region). In the meantime, and as a safety against the USD/EUR, they're encouraging their people to save in gold via trading, storing and purchasing accounts offered at every major bank, and have recently announced using 300 billion of US treasuries to purchase global mining assets. They have also shut down every gold mining company that producers under 50 tons which could effect the market in 2012. 

The BRICS have made numerous offers to America and Europe to contribute funds to the IMF in exchange for higher quotas. The problem is, America or Europe do not want to lose their veto power, so they continue to scramble for solutions, yet there are no solutions, other then to print. You can see IMF proposals here http://i42.tinypic.com/23gy77n.png

The BRICS are working very closely as an Anti-USD unit—all eyes on them in 2012.

Sun, 12/25/2011 - 07:05 | 2010085 onebir
onebir's picture

I think the point of this is that the RMB would be selling off sharply if the PBOC wasn't supporting it. That seems pretty strange considering that they've been trying to keep low, but I guess if it turns too sharply hot money will reinforce the trend & rapid weakining of the RMB will cause even more inflation in China.

Hong Kongers - unlike almost anyone else - can easily buy RMB, and with the HKD pegged to USD, the gradual appreciation of RMB has made buying it a bit of a no-brainer for quite a while. (Indeed, the forex page of HSBC HK has been showing that RMB was the 'most popular currency' among its customers for months.)  So perhaps if PBOC don't manage to keep the RMB down, the HKers will stampede back into HKD, leavin HKMA with a difficult decision re the dollar peg...  

Mon, 12/26/2011 - 20:55 | 2012462 ThrivingAdmistC...
ThrivingAdmistCollapse's picture

I can see the BRICs scrambling for an alternative currency solution to stave off economic collapse.

Sat, 12/24/2011 - 20:54 | 2009646 Yen Cross
Yen Cross's picture

 It will always be worthless" YUAN".   Nap time?  Still " Worthless YUAN". 

 

   Rub one out China!

Sat, 12/24/2011 - 21:11 | 2009655 Newsboy
Newsboy's picture

The Dollar is in play now, so the Chinese play the dollar.

Sat, 12/24/2011 - 21:17 | 2009661 RockyRacoon
RockyRacoon's picture

Ooooh.  It's gonna be bad when all those dollars come home to Papa (Ben).   He won't be able to buy enough crappy mortgages to spend all those repatriated dollars. 

Sat, 12/24/2011 - 21:56 | 2009674 Tunga
Tunga's picture

SDR Bitches.

Sat, 12/24/2011 - 22:30 | 2009698 Yen Cross
Yen Cross's picture

 The" YUAN" , is and always will be the " YUAN"!  WHF is the " RMB" ?  Float your debt " PBOC"!

Sat, 12/24/2011 - 23:16 | 2009741 RobotTrader
RobotTrader's picture

China is buying dollars, not selling.

 

99.5% of their Treasury purchases the last 20 years are currently in a winning position.

Sun, 12/25/2011 - 02:51 | 2009943 tmosley
tmosley's picture

So you are saying that they plan to hold them until they become losing positions?

Sun, 12/25/2011 - 05:15 | 2010035 css1971
css1971's picture

I'm relatively sure that china is the one who will decide when they become losing positions.

Sat, 12/24/2011 - 23:48 | 2009778 Yen Cross
Yen Cross's picture

 China is NOT buying dollars! China Is  buying European Sovereign debt, " Quietly".

 

   China finances their trade portfolio via the  " FED". They have no positive cash flow, other than the cost basis of trade.

Sun, 12/25/2011 - 11:59 | 2010318 ucsbcanuck
ucsbcanuck's picture

You mean China is buying German sovereign debt "quietly"? Why would anyone want to touch Spain and Italy, or even France?

Sun, 12/25/2011 - 21:19 | 2010858 Yen Cross
Yen Cross's picture

 I stand corrected.

Sun, 12/25/2011 - 00:00 | 2009794 jdkeller
jdkeller's picture

If the chinese are selling dollars, then inflation must be scaring the daylights out of them.  Think what would have happen if they had not been selling dollars this whole time, the yuan would have cratered and the dollar popped.  Something like 60% of the world debt is denominated in USD, at 5% interest that means that there is permaneate bid for ~1 trillion usd.

Sun, 12/25/2011 - 02:51 | 2009944 ddtuttle
ddtuttle's picture

Don't forget that oil must be purchased in dollars ... then you burn it up and come back for more.

Another pemanent bid on dollars.  At 80Mbbl/d that's almost $3Trillion per year.  Of course not all oil gets sold on the open market, but half of it does.

 

Sun, 12/25/2011 - 20:59 | 2010850 Rick64
Rick64's picture

Think what would have happen if they had not been selling dollars this whole time, the yuan would have cratered and the dollar popped.

How can the yuan crater and the dollar go up when its pegged to the dollar? If they are selling dollars then it wouldn't it mean that they want their currency to go down as well, since its pegged to the dollar.

Mon, 12/26/2011 - 06:29 | 2011502 onebir
onebir's picture

The market is now selling yuan, and the PBOC is buying yuan to maintain the peg.

That's how one of the ways they achieve the pegging - buying and selling yuan against the market when it would otherwise move the exchange rate away from the peg. Another way is control over who can buy and sell yuan - aka capital controls. (eg it's difficult for westerners in China to sell yuan directly. Or it was about a year back when I tried. Lucky for me the changed the rules for the Asian Athlerics Championship - not sure if they've changed back... Judging from the charts, it appears these controls aren't really working too well, given the implied yuan selling that's been going on recently...)

Mon, 12/26/2011 - 08:06 | 2011533 Rick64
Rick64's picture

It seems that it is no longer pegged but traded under a managed float system like it was before the global recession (I could be wrong but that is what I read today and previously thought it was pegged). It is allowed to move a predetermined amount (up or down) in a day by the PBoC. So they have allowed the appreciation of the yuan albeit slowly, except for a few yrs. during the recession.

Sun, 12/25/2011 - 06:00 | 2010061 split4to1
split4to1's picture

http://www.traddr.com/photo/aheurusd-25 EUR/USD tells of a different tale 

Sun, 12/25/2011 - 06:41 | 2010077 onebir
onebir's picture

& if the PBOC is intervening in daytime trading too - which I imagine it does to some extent - the intraday movements are a net of intervention to prop up the RMB against a selloff...  (ie the effects of the intervention are understated by the movements of the interday line.)

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