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CNY Suffers Biggest 2W Fall Since 1994

CHINA
  • Selling pressure on Chinese Yuan was intense in the second half of April, with USDCNY reaching a local high of 6.65 during the overnight session before consolidating lower.
  • USDCNY is up 3.5% in the past two weeks, registering its largest 2W change since 1994 (+4.5% at the 6.65 peak) and surpassing the August 2015 move, which generated a market shock.
  • As a result, EM currencies have been under stressed in the past two weeks; to the exception of the Ruble, all EM currencies are down against the US Dollar.
  • ‘Risk on’ ZAR is the worst performing currency, down over 8% against the US Dollar.
    • We previously saw the CNY weakness has been the major driver of ZAR lately (correlation between CNY and ZAR surges when implied vol on CNY spikes).
  • In addition to China officials’ easing signals (rate cuts + rebound in ‘liquidity’), renewed geopolitical tensions, hawkish Fed comments and the acceleration of the economic slowdown have all been supporting the greenback.

Source: Bloomberg/MNI

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  • Selling pressure on Chinese Yuan was intense in the second half of April, with USDCNY reaching a local high of 6.65 during the overnight session before consolidating lower.
  • USDCNY is up 3.5% in the past two weeks, registering its largest 2W change since 1994 (+4.5% at the 6.65 peak) and surpassing the August 2015 move, which generated a market shock.
  • As a result, EM currencies have been under stressed in the past two weeks; to the exception of the Ruble, all EM currencies are down against the US Dollar.
  • ‘Risk on’ ZAR is the worst performing currency, down over 8% against the US Dollar.
    • We previously saw the CNY weakness has been the major driver of ZAR lately (correlation between CNY and ZAR surges when implied vol on CNY spikes).
  • In addition to China officials’ easing signals (rate cuts + rebound in ‘liquidity’), renewed geopolitical tensions, hawkish Fed comments and the acceleration of the economic slowdown have all been supporting the greenback.

Source: Bloomberg/MNI