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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
CHINA
- Selling pressure on the Chinese Yuan has been elevated in the past ten days, with USDCNY breaking above its ST key resistance at 6.5125 yesterday and currently trading at its highest level since April 2021.
- Looking at the WoW change (>2%), it was the biggest move since the August 2015 ‘devaluation’ (top chart), which generated a market shock with the SP500 falling by over 10%.
- Interestingly, the CNY depreciation has also coincided with some sharp moves in EM FX.
- All EM currencies are now down against the US Dollar since the start of the CNY ‘depreciation’ (excl. RUB), with the South African standing at the bottom of the ‘League’ (-6.8%).
- Even though the he rand may have been impacted by the recent flooding in and around Durban, the CNY weakness may have been the most important driver of the USDZAR recently.
- The bottom chart shows the strong co movement between USDCNY and USDZAR since the start of last week.
- As the 2015 CNY episode generated a negative shock on markets, investment managers may reassess their risk based on CNY moves, therefore leaving ‘risk on’ EM currencies vulnerable.
- Hence, further CNY weakness may continue to weigh on EM currencies in the short term despite EM policymakers maintaining a hawkish to tame inflation (CEEEMA ex- Turkey and Latam).
Source: Bloomberg/MNI
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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