Chinese yuan’s slide: Nothing to see, here, folks

China has preemptively eased monetary policy in response to American trade pressures, and the RMB has weakened modestly in response. Speculative interest in the RMB is minimal, as indicated by the very low rate for borrowing overnight RMB offshore in Hong Kong. 

“‘For hedge funds, the world has moved on from the view of a disorderly China devaluation,’ said Stephen Coltman, a senior investment manager on the Alternatives Investment strategies team at Aberdeen Standard Investments.”

“While specialist currency funds were still playing moves in the yuan, macro hedge funds – which bet on macro-driven moves in stocks, indexes, rates and currencies – were largely absent. That can be seen in the offshore derivatives market in non-deliverable forwards, which were not pricing massive yuan depreciation, Coltman said.”

“Contrasting with the ‘hard landing’ fears of 2015, most investors reckon that China’s economy is on a strong footing, and yuan weakness could be just a policy-loosening tool, alongside targeted reserve requirement cuts. ‘Our big data indicators on the ground are pointing to an upside risk to the consensus regarding economic activity.’ said Isabelle Mateos y Lago, chief multi-asset strategist at BlackRock Investment Institute in London.”