Showing posts with label Yuan. Show all posts

Saturday, August 15, 2015

Chinese Yuan – What Has Happened?

The July Trade Numbers

The Chinese government saw a drop of 8.9 percent in exports for July and reacted swiftly with a devaluation of the Yuan. Being the world’s largest goods trader, China has set up for many changes to happen around the world.

(Xinhua)
Zhang Xiaohui, assistant governor of China's central bank, said the value of the yuan has gradually returned to market levels as the discrepancy between the central parity rate and the actual trading rate has been largely corrected after declines early this week.
"There are no grounds for persistent and substantial depreciation as sound economic fundamentals determine that the yuan will re-enter a rising streak," said Zhang.

Here is a one year chart of the USDCNY from Bloomberg

To understand what is happening with the Yuan will take a significant amount of research and consideration of a lot of opinions. Our weekend will be filled with studying the effects of the recent moves in the Yuan. Many currency pairs will be affected by this move and that will develop in coming days.
I have gathered several articles below, and, as well, Bloomberg has quite a collection of articles on their site at this link.

China's Yuan Could Fall 10% or More - Barron's
http://news.google.com Sat, 15 Aug 2015 05:40:31 GMT

Barron'sChina's Yuan Could Fall 10% or MoreBarron'sOn a sultry mid-August evening last week, world currency markets were rocked by what amounted to nothing short of a regime change: China announced a devaluation and freer float of its currency, the y ...
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China Gambles with the Yuan - The New Yorker
http://news.google.com Fri, 14 Aug 2015 12:08:45 GMT

The New YorkerChina Gambles with the YuanThe New YorkerIf you're confused by what's been happening to China's currency over the past few days, don't feel bad. The wild ride that the yuan has taken has left plenty of people perplexed, including, perha ...
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IMF Calls China's Yuan Moves Welcome Step to More Flexible Rate - Bloomberg
http://news.google.com Sat, 15 Aug 2015 00:15:48 GMT

Wall Street JournalIMF Calls China's Yuan Moves Welcome Step to More Flexible RateBloombergThe International Monetary Fund said China's move to link the yuan's value to market forces is an encouraging step toward what may become a freely floated curr ...
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Many factors at play in the devaluation of yuan - Marketplace.org
http://news.google.com Fri, 14 Aug 2015 21:29:51 GMT

Marketplace.orgMany factors at play in the devaluation of yuanMarketplace.orgA man changes foreign currency into Chinese yuan in Hongqiao airport in Shanghai on Friday. China's central bank raised the value of the yuan against the U.S. dollar by 0.05 ...
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Stocks end week lower, bruised by China yuan weakness - Reuters
http://news.google.com Fri, 14 Aug 2015 20:59:00 GMT

ReutersStocks end week lower, bruised by China yuan weaknessReutersFor the week, the MSCI All World Index fell 0.4 percent, its second consecutive weekly decline. China's modest devaluation of its currency dominated market activity, as the yuan lost ...
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China policymakers may lose control of yuan: Trader - CNBC
http://news.google.com Fri, 14 Aug 2015 12:15:51 GMT

CNBCChina policymakers may lose control of yuan: TraderCNBCThe next GDP print let's say misses and the market really tries to push the yuan lower. Will the Chinese government simply let the yuan float or will they come back and try to put the genie b ...
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Wall St settles after yuan shock week - The Australian Financial Review
http://news.google.com Fri, 14 Aug 2015 21:08:58 GMT

The Australian Financial ReviewWall St settles after yuan shock weekThe Australian Financial ReviewWall Street markets were composed at the end of a tumultuous trading week, as China's plunging currency stabilised and positive American economic data ...
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US stocks make slight gains as yuan and oil stabilize - WRAL.com
http://news.google.com Fri, 14 Aug 2015 14:26:15 GMT

WRAL.comUS stocks make slight gains as yuan and oil stabilizeWRAL.comCHINA CALM: China's currency, the yuan, was stable after falling sharply earlier this week. On Friday, the dollar was buying 6.3901 yuan, little changed from the previous day when Z ...
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How China's yuan devaluation could affect your food costs - Moneycontrol.com
http://news.google.com Sat, 15 Aug 2015 08:04:24 GMT

Moneycontrol.comHow China's yuan devaluation could affect your food costsMoneycontrol.comChina is one of the world's biggest importers of what are known as "soft" commodities – including key ingredients such as soybeans. China's imports have become m ...
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Impact on rupee from China's yuan move to be temporary: Economic adviser ... - Times of India
http://news.google.com Sat, 15 Aug 2015 09:09:00 GMT

NDTVImpact on rupee from China's yuan move to be temporary: Economic adviser ...Times of IndiaNEW DELHI: The impact of the devaluation of the Chinese yuan on the rupee will only be "temporary", given "adequate" foreign exchange reserves, the country' ...
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Friday, August 14, 2015

Roundup of Posts for the Past Week

Chinese Yuan depreciates further: What is the endgame?

The devaluation of the Yuan is going to have a significant effect on markets, forex, stocks, commodities, futures as weeks pass. This article appeared on eftrends site August 13.

This article was written by Rob Waldner, chief strategist and head of the Multi-Sector team for Invesco Fixed Income.

After China’s surprise devaluation of the yuan by 1.9% on Tuesday, the Chinese currency was devalued by another 1.6% on Wednesday.¹ Policymakers appear to be following a pattern of setting the daily fix — which sets the center point for trading during that day — with reference to the market price at the close of the previous day. Invesco Fixed Income believes that further devaluations are likely as the People’s Bank of China (PBoC), the country’s central bank, acquiesces to market pressure and price movements over time.

‘Dirty float’ strategy confirmed

On Tuesday, the PBoC intervened in the currency market at the end of the day to apparently limit depreciation of the exchange rate into the market’s close. This confirms our view that China is likely pursuing a so-called “dirty float” — a floating exchange rate system in which a government or central bank occasionally intervenes to affect the value of its country’s currency in a managed fashion. With this intervention, we believe the PBoC aims to control the speed of the yuan’s depreciation to prevent it from declining too rapidly. It remains to be seen how effectively the authorities will be able to manage the yuan’s fall. Further yuan depreciation is likely, in our view, and we anticipate competitive devaluations down the line among China’s trading partners, especially in Asia.

Interpreting these devaluations

There appears to be some confusion locally and abroad about the rationale for Tuesday’s decision to alter the currency regime for the first time in more than two decades. The domestic Chinese press discusses the move in terms of needed reform to make the yuan more market driven, perhaps making it more likely to be included in the International Monetary Fund’s Special Drawing Rights (SDR) basket of international reserve currencies. SDRs serve to supplement member countries’ official reserves. An additional interpretation is that the devaluation could help boost exports to support economic growth. Both views are valid.

The bigger picture

In our view, China’s recent currency regime change fits into a broader story: Major economic blocs have adjusted their currencies in recent years to reignite growth and combat disinflationary and deflationary pressures caused by the long cycle of deleveraging following the great financial crisis.

We believe that we’re moving into an environment of ongoing depreciation of the yuan to boost growth, offset deflationary pressure and manage high debt loads within the Chinese economy. Similar policy action occurred beginning two years ago in Japan and a year later in Europe. In our view, China’s move opens the Asia chapter.

Competitive devaluations across the globe aren’t possible without affecting all major economies, as indicated by the current volatility upswing in global markets in response to China’s latest policy action. Although the need for Chinese stimulus has been clear, our core view had been that the Chinese authorities would proceed without using its currency as a policy tool. Instead, China has apparently put the yuan in play. The impact of this move will extend to many markets and have several implications. In our view:

We’re entering a period of US dollar appreciation versus non-Japan Asia. Therefore, we are reallocating our currency views to be short non-Japan Asia, namely Taiwan, Korea, Malaysia, Singapore, and China.

The yuan devaluation is positive for both European and US government bonds, in our view. The deflationary impact of a weaker yuan and non-Japan Asia currencies is likely to lead to declines in long-maturity government bond yields in Europe and the US and lead to yield curve flattening.

Yuan devaluation probably means the Federal Reserve (Fed) will need to tighten less. While we believe the Fed will likely raise interest rates by the end of this year, possibly as soon as September, China’s move may decrease the amount of tightening necessary, ultimately reducing the terminal fed funds rate and effectively limiting the level of US interest rates.

In general, riskier assets, such as stocks and credit assets, are likely to come under some pressure in the face of deflationary pressures. We believe Asia and emerging market credit in general are likely to be the most pressured, while European credit is likely to be the most isolated.

Wednesday, August 12, 2015

News About The Chinese Yuan

Certainly the recent changes in the value of the Chinese Yuan are going to upset the markets for a few days and force people to re-evaluate their trading strategies.

Below are a group of articles that I have located and they offer some insights as to what may be coming in future days as currencies are being adjusted worldwide.

I will update this in a few hours as more articles appear and effects of the Yuan devaluation take hold.

Investors Test Limits of Weak Chinese Yuan - Wall Street Journal
http://news.google.com Wed, 12 Aug 2015 08:19:23 GMT

BBC NewsInvestors Test Limits of Weak Chinese YuanWall Street JournalInvestors drove China's yuan lower Wednesday, but China's central bank cushioned its fall, casting doubt on its promises to allow the market to play a greater role in setting the cu ...

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Oil steadies as bullish IEA balances Chinese yuan slide - Reuters
http://news.google.com Wed, 12 Aug 2015 10:11:30 GMT

ReutersOil steadies as bullish IEA balances Chinese yuan slideReutersChina is the world's biggest oil consumer after the United States and a weaker yuan erodes Chinese purchasing power for dollar-denominated imports like oil, potentially reducing fue ...

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China's yuan devaluation turns up heat on Asia - CNNMoney
http://news.google.com Wed, 12 Aug 2015 04:29:52 GMT
China's yuan devaluation turns up heat on AsiaCNNMoneyChina's surprise decision to devalue its currency is turning up the heat on the rest of Asia. The yuan has fallen roughly 3.5% over the past two days following a move by the People's Bank of China ...

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China Roils Markets for Second Day as Yuan Tumbles With Stocks - Bloomberg
http://news.google.com Wed, 12 Aug 2015 01:39:16 GMT

BloombergChina Roils Markets for Second Day as Yuan Tumbles With StocksBloombergChina's yuan tumbled, sparking the biggest two-day selloff in regional currencies since 1998 and fueling concern that financial-market volatility will curb global economi ...

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Q&A: What yuan devaluation means for China, other countries - Yahoo Finance UK
http://news.google.com Wed, 12 Aug 2015 03:36:23 GMT

Yahoo Finance UKQ&A: What yuan devaluation means for China, other countriesYahoo Finance UKFILE - In this March 15, 2012 file photo, a Chinese woman poses for photos near a sculpture depicting a Chinese yuan note at an art district in Beijing, China. ...

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Dollar Falls as Yuan Move Clouds Fed Outlook - Wall Street Journal
http://news.google.com Wed, 12 Aug 2015 05:00:04 GMT
Dollar Falls as Yuan Move Clouds Fed OutlookWall Street JournalThe dollar tumbles against the euro and yen as the outlook for tighter Fed policy gets murkier for investors after China's currency adjustment hits the yuan for a second day. Investors ar ...

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Chinese yuan slides further after major devaluation - Reuters
http://news.google.com Wed, 12 Aug 2015 09:20:10 GMT

ReutersChinese yuan slides further after major devaluationReuters4:55am EDT - 01:48. The yuan continued its fall a day after China devalued the currency to possibly help prop up the slowing economy, and both investors and market watchers are still tr ...

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Has China's Yuan Move Put Global Rate Hikes on Hold? - Bloomberg
http://news.google.com Wed, 12 Aug 2015 10:42:45 GMT
Has China's Yuan Move Put Global Rate Hikes on Hold?BloombergGlobal markets are feeling the effects of China's yuan devaluation amid concerns that volatility will impact global growth. Bloomberg's Jonathan Ferro and Tim Craighead discuss the potentia ...

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Rupee Sinks to 2-Year Low on Yuan Devaluation, Very Close to 65/Dollar - NDTV
http://news.google.com Wed, 12 Aug 2015 10:22:49 GMT

NDTVRupee Sinks to 2-Year Low on Yuan Devaluation, Very Close to 65/DollarNDTVChina on Wednesday allowed the yuan to fall sharply for a second straight day. The People's Bank of China had billed Tuesday's move as a free-market reform but experts susp ...

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Tuesday, August 11, 2015

USDCAD Trading Strategy As At August 11, 2015

The Canadian Dollar pair has again been knocked lower, this time by adjustments to the Yuan and the price of oil.

Here are some opinions as to the price of the Canadian Dollar (USDCAD)

Canadian dollar hit by yuan drop, fresh low for oil - CBC.ca
http://news.google.com Tue, 11 Aug 2015 16:43:00 GMT

CBC.caCanadian dollar hit by yuan drop, fresh low for oilCBC.ca'Fears of a prolonged decline in demand by the world's second largest economy caused oil and other commodity prices to slump, another blow to the Canadian dollar,' Sherry Cooper, chief ec ...

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Canadian dollar down more than half a U.S. cent - CP24 Toronto's Breaking News
http://news.google.com Tue, 11 Aug 2015 14:43:09 GMT

The Globe and MailCanadian dollar down more than half a U.S. centCP24 Toronto's Breaking NewsToronto's main stock index and the Canadian dollar were down sharply Tuesday morning as the devaluation of China's yuan sent ripples through the world's fina ...

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Oil Price Strain Weighing on Canadian Dollar to GBP, Euro & US Dollar ... - Exchange Rates UK
http://news.google.com Tue, 11 Aug 2015 14:51:50 GMT

Exchange Rates UKOil Price Strain Weighing on Canadian Dollar to GBP, Euro & US Dollar ...Exchange Rates UKOil prices dropped to a fresh 8-month low at the beginning of the week, but the Canadian Dollar still managed to post gains against the Pound. ...

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Oil rally sends loonie back to near 77 cents (US) - The Globe and Mail (subscription)
http://news.google.com Mon, 10 Aug 2015 22:20:00 GMT

The Globe and Mail (subscription)Oil rally sends loonie back to near 77 cents (US)The Globe and Mail (subscription)The Canadian dollar closed up on Monday at 76.92 cents (U.S.). Compared to Friday's close it was up 0.71 cents (U.S). There was no majo ...

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Loonie steady, US index futures positive ahead of North American open - CTV News
http://news.google.com Mon, 10 Aug 2015 11:12:30 GMT
Loonie steady, US index futures positive ahead of North American openCTV NewsTORONTO - The Canadian dollar was holding steady and U.S. index futures were up ahead of trading on North American stock markets. The loonie traded at 76.18 cents US, up 0.0 ...

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