Welcome To The Currency Wars, China Yuan Devalues Most In 20 Years!

The last 7 days have seen the unstoppable ‘sure-thing’ one-way bet of the decade appreciation trend of the Chinese Yuan reverse. In fact, the 0.95% sell-off is the largest since 1994 (bigger than the post-Lehman move) suggesting there is clear evidence that the PBOC is intervening.

The fact that this is occurring with relatively stable liquidity rates (short-term repo remains low) further strengthens the case that China just entered the currency wars per se as SocGen notes, intending to discourage arbitrage inflows. For the Chinese authorities, who do not care about the level of their stock market (since ownership is so low), and specifically want to tame a real-estate bubble, this intentional weakening is clearly aimed at trade – exports (and maintaining growth) as they transition through their reforms. The question is, what happens when the sure-thing carry-trade goes away?

Read more:

http://www.zerohedge.com/news/2014-02-25/welcome-currency-wars-china-yuan-devalues-most-20-years

Jamie McGeever ‏@ReutersJamie · 1 h
Big moves in the renminbi this month. China’s currency on track for its biggest monthly fall in 20 years:

https://twitter.com/ReutersJamie/status/438220165952458752/photo/1

Here are the four biggest debates in the markets right now

In an emailed note, Englander offers some color surrounding each debate:

How much slack in the U.S. economy? — This subject continues to come up in client discussions, with many investors remaining skeptical that the slack that Fed Chair Yellen sees in labor markets exists in reality. The impact of last week’s minutes was so powerful because it was the first indication that Fed officials might be wavering in their commitment. Fed Chair Yellen’s testimony on Thursday will be a focal point. We think early innings will go to the Fed doves, but that the dovish view will be harder to maintain as time goes on.

Read more at http://investmentwatchblog.com/welcome-to-the-currency-wars-china-yuan-devalues-most-in-20-years/#ajl5CkkgqhMx6wO8.99