Following Double-Fed Emergency Meetings, China Devalues Yuan By Most In 3 Months

After weeks of "stability," and following two emergency Fed meetings in 3 days (and an unexpected ease by MAS), The PBOC decided today was the right time to drastically slash the Yuan fix by 300 pips. This is the largest devaluation of the Chinese currency since January 7th (and second largest since August's world-market-turmoiling devaluation). Offshore Yuan had been tumbling all day (shrugging off the supposedly better trade data as FX traders saw through the colossal spike in imports from HK as indicative of capital outflows), and is falling further following PBOC's cut.

 

As Bloomberg's Tom Orlik notes, China's March imports from Hong Kong soared an implausible 116% YoY! As it is clearly disguising capital flows...

Trade mis-invoicing as a way to hide capital flows remains a factor. In the past, over-invoicing for exports was used as a way to hide capital inflows.

 

The latest data show the reverse phenomenon, with over-invoicing of imports as a way of hiding capital outflows.

 

And Offshore Yuan - after an initial modest rally on the trade data - plunged all day...

 

Which seemingly prompted PBOC to slash its Yuan Fix...by the most in 3 months...

 

As it appears it is time for the USD to take its punishment (as JPY and EUR has in the last few weeks of divergence between Yuan basket and USDCNY)...

 

All of this chaos amid the biggest short-squeeze in US stocks in 6 months makes us wonder if something serious is not breaking behind the scenes and every effort is being made to put lipstick on this pig.