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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
- In the past week, we have seen significant moves in the CNY, with USDCNY breaking some key technical resistance lines (200DMA, LT downward trending line) and surging above the 6.50 level on Friday.
- Looking at the WoW change (>2%), it was the biggest move since the August 2015 ‘devaluation’, 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.
- For instance, it was surprising to see that ‘risk on’ ZAR experienced strong selling pressure last week despite an ease in price volatility (in the first half of the week); the rand is the worst performing currency last week, down over 6% against the USD.
- The bottom chart shows that CNY has shown strong correlation with ZAR over time (daily returns), particularly when the implied vol on CNY is surging.
- The rand may have been impacted by the recent flooding in and around Durban, but the CNY weakness may have been a stronger driver of the USDZAR last week, triggering some key stop losses and therefore exacerbating the move.
- Therefore, further CNY weakness may matters for some 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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