The offshore Yuan just crashed to its weakest against the greenback in 11 months.
The pace of the devaluation is suddenly accelerating (today is the biggest drop in the Yuan in 5 months), with Yuan testing 6.70...
For context this means that ALL US exports to China are now 7.4% more expensive than they were in Q1 - that's quite a blanket tariff.
And as we noted previously, before this is dismissed as just the mirror of USD strength, we suggest the following chart shows very clearly the PBOC allowing the Yuan to weaken notably against just the dollar while - until the last few week - maintaining Yuan's buying power against the rest of the world.
Additionally, as Capital Economics points out, if the PBOC is using the exchange rate to fight back against the US, it is pulling its punches: the PBOC’s daily reference exchange rate has in the past few days been stronger than market rates might have suggested, not weaker.
It is of course still notable that the PBOC has done relatively little to stand in the way of the currency slide, even if it isn’t directly responsible for it. It always argues that the exchange rate is driven by market forces.
But its tolerance will probably only go so far, given the painful experiences of 2015 and 2016: any benefit to exporters would be swamped if depreciation triggered economic and financial instability.
Still, as a wise market participant noted, while all the bellicose language is coming from Trump, perhaps the biggest factor right now is that Beijing has "weaponized" the Yuan...