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Defending the Yuan

Perhaps it’s not a coincidence that US treasury se restart Yellen is in #china for a few days. #pboc has spent 1Tn CNY defending their currency, because it has depreciated very quickly against the dollar over the last few days, topping levels not seen since 2006. China was expected to stimulate its economy, to avert a real estate crisis and a banking crisis, but instead, they’ve pushed the brakes and are now draining liquidity from the system, to defend the currency. The fed was counting on China and Japan, the only to major economies with dovish monetary policies, to contine its hiking cycle and control inflation without affecting global liquidty. Now China’s priority one is to defend the Yuan, which implies an aggressive, firm hawkish stand. This is incredibly important at this point because risky assets (equities, corporates, etc) are highly correlated to global liquidity.

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