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31 Mar 2016
PBOC allowed much stronger CNY fix again today - Rabobank
Elwin de Groot, Eurozone Strategist at Rabobank, notes that the PBOC allowed the CNY to fix much stronger again today, reversing previous fixes weaker, and apparently a response to the Fed's "we won't raise if you don't devalue" message.
Key Quotes
“For now that fix adds to market happiness, as they are still luxuriating in the warm chocolatey after-glow of Fed dovishness; in short, it's liquidity to the fore over fundamentals once again at the moment.
However, this looks very much like a strategic 'balance of terror': if the Fed raises at some point, then China and markets crack; if China devalues, the Fed and markets crack. And yet with the Fed doing so little the onus is on the ECB and BoJ to do more, even though that might lead to the Fed or China having to respond, and hence markets may still crack.”
Key Quotes
“For now that fix adds to market happiness, as they are still luxuriating in the warm chocolatey after-glow of Fed dovishness; in short, it's liquidity to the fore over fundamentals once again at the moment.
However, this looks very much like a strategic 'balance of terror': if the Fed raises at some point, then China and markets crack; if China devalues, the Fed and markets crack. And yet with the Fed doing so little the onus is on the ECB and BoJ to do more, even though that might lead to the Fed or China having to respond, and hence markets may still crack.”