### POV: ANY CHINESE YUAN DEVALUATION....>

CHINA YUAN: ### POV: ANY CHINESE YUAN DEVALUATION MAY SPUR AUD, NZD SALES AND

STRENGTHEN THE EUR

-For much of the session today, markets pondered the possibility of China

devaluing the CNY in order to combat Trump's tariffs (a prospect first raised in

an MNI Exclusive interview March 23rd).

-The PBoC last devalued the CNY in mid-August 2015, which prompted USD/CNY to

jump 4% in 2 days, from Cny 6.21 to 6.45. This presaged a 10% sell-off in the

S&P 500 and a 32bps drop in the US 10yr yield.

-In FX, it was commodity-linked and high-yielding currencies that faltered:

NZD/USD fell as much as 8.3% in a day (although recovered to fall by a mere

3.1%) alongside weakness in the ZAR, AUD and RUB. The opposite was true for the

EUR. After the devaluation, EUR/USD had its strongest four-day rally in over six

years, rising 5.5%.

-Interestingly, it took a few days for the move in equities, bonds and wider FX

to follow the change in Chinese policy. It seems unlikely traders will be caught

unawares a second time, so expect a far quicker reaction this time around.