The 30-day correlation between USDCNY and.....>

CHINA: The 30-day correlation between USDCNY and Chinese stocks (using the CSI

300) sits at the highest level on record, 0.9786. Previous occurrences of the

correlation approaching 1.00 have been somewhat short-lived, with correlations

edging down amid a trend change in one or both of the assets. 

- One scenario that could lead to a decline in the correlation could be if

Chinese stocks begin to benefit from a weaker yuan. This was the case back in

August 2015 when acute selloffs in both markets gave way to further gradual yuan

weakness and higher stock prices, as easier monetary policy and cheaper exports

breathed relief into equity prices. 

- The scenario of weaker stocks and a stronger yuan seems much less likely at

present given China's increasingly loose monetary policy stance relative to the

US.