Chinese Yuan Tumbles Most Since January 2017 As Dollar Surges

Following a slight retracement early in the morning, the USD dollar has enjoyed two spurts higher following the strong PPI report and again after the unexpectedly strong 10Y auction.

As a result of the dollar surge, the offshore yuan is tumbling, its biggest drop since January 2017, and has tagged 6.72, a level last seen during the mini Chinese freak out on July 3 which saw aggressively PBOC verbal intervention, and well beyond the central bank's so-called "redline" below 6.70.

What is odd is that the Yuan rout continued even after the Commerce Dept announced it has signed an escrow agreement with Chinese telecommunications ZTE and once the the company has completed the $400m deposit, the agency would issue a notice lifting the denial order, allowing the company to resume business as usual, and ostensibly an olive branch from the Trump administration to China.

The dollar strength has been broad-based, and has pushed all key pairs lower against the greenback, with the EUR sliding below 1.17 and the USDJPY jumping above 1.12

It is unclear what specific catalyst may have caused today dollar rampage, but unless there is some intervention, most likely from the PBOC, the brief piece in emerging markets is unlikely to continue, and as Goldman warned earlier, "the terrible trio" may be about to manifest itself, resulting in rolling routs across the EM space in the coming days if not hours.

Comments

Kreditanstalt Wed, 07/11/2018 - 14:40 Permalink

I've never comprehended why these "investors" persist in buying an already hugely-expensive US dollar just because it is CURRENTLY rising...

There are bargains out there almost everywhere BUT in the American dollar.  I hope something unpredictable happens and dollar buyers get their heads handed to them

truthalwayswinsout Wed, 07/11/2018 - 15:24 Permalink

Tempest in a teapot.

Just write tariffs pegged to the amount you want plus any fluctuations in the Yuan.

End of story.

Trump is doing it all wrong anyway. We have been in a war for 30 years and now are just realizing it. You do not win a war the way we fought in Vietnam with gradual escalation.  We need an embargo that will end Communist Rule. The Communist party would not survive more than a few weeks with a full embargo.

 

Chief Joesph Wed, 07/11/2018 - 17:48 Permalink

This article is hyer-nuts.  The yuan today is what it was in 2010, 6.68 yuan to the dollar.  It really hasn't varied any stronger than 6.14 to the dollar, or any weaker than 6.93 since.  Its within an exchange range that is "normal".  And toss that Bloomberg chart out the window.  Its not relevant.

Y2JPD Wed, 07/11/2018 - 18:21 Permalink

The yuan to the dollar is irrelevant...the entire scheme is based on the yuan to the renminbi which has different valuations for Chinese international trade vs. domestic consumption.