Chinese Yuan Tumbles To New Cycle Low Amid Signs Of Capital Outflows

 As Chinese markets began to wake, yuan just broke below 6.98/USD for the first time in this downswing, despite PBOC liquidity withdrawals sending money market rates spiking (to squeeze yuan shorts).

This has the distinct smell of capital outflows...

It has been a one way street since Golden Week...

 

And if former UBS Chief Economist George Magnus is right, any hopes for the G20 meeting between Trump and Xi should be extinguished. In a series of tweets, Magnus warned...

Trump and Xi are supposed to meet at the G20 in Buenos Aires at end month. Will they talk trade? They need to cos Trump has already threatened to subject the other of 50% of imports from China to punitive tariffs. This is how he prepares the ground, telling Fox News:

“I think that we will make a great deal with China and it has to be great, because they’ve drained our country,”.

Designed to turn XJP frostier, be even less inclined to bring something to the table, and more anxious not to be seen to be succumbing to foreign pressure.

So I think, barring something going on in the background, these talks are set up to fail, assuming they happen. The 10% tariff rate is due to go to 25% on 200bn $ of goods on 1 Jan anyway, and we shd probably expect WHY to go for the remaining 250bn $ of imports in new year...

2019 big year for China. centenary of founding of CCP. and rivals Soviet CP's 72 years in power. Xi's Chinese Dream of Rejuvenation of Chinese Ppl isn't just a slogan. Being seen to succumb to Trump's WH is just not on. Expect both sides to dig in further

Begs question as what China will do next. Xant tit for tat any more, as they have run out of room. @davidjlynch in @washingtonpost reminds us that tourism cd be a target. Targeting US firms also could be cranked up. Yuan depreciation also poss tho v risky at home too ...

Much longer discussion and background written up in Red Flags, just out in the US this month....the details change with the news and announcements, but the substance is sadly all too clear.

For now, 7.00 looms heavy on the horizon... and everyone knows the target is there to test PBOC.

6.9895 is the historical low for offshore yuan (Jan 2017)...