Here’s a look at the charts for both the onshore and offshore yuan currencies:
USD/CNY daily chart
USD/CNH daily chart
The latest bout of the weakness in the yuan sees the currency fall to its lowest since late October to early November last year. And that is where Beijing is stepping in to limit the downside. The question though, is how long can they keep this up? It’s one thing to send a message back to markets and speculators but this goes beyond that as China’s economy is showing real signs of weakness that we haven’t seen in ages.
Adam had a great post overnight here, where he links everything together including what is happening with the bond market at the moment. Do check it out and give it some food for thought when you have the time.
And I wouldn’t argue much with that, since it just adds to the narrative of there being waves of supplies in Treasuries at the moment.
Anyway, going back to the yuan, it seems clear that there is a hard line being drawn by Beijing currently. But if the struggles of the Chinese economy continues through to next year and with there being no major fiscal help, I don’t see how markets will turn a kind eye towards the yuan currency in the near future.