AceTraderFx Aug 11: The yuan which had caused intra-day broad-based rally in the USD

[B]11 Aug 2015[/B] [I]02:14GMT[/I]

Reuters reported China devalued the yuan on Tuesday after a run of poor economic data, guiding the currency to its lowest point in almost 3 years.
The central bank described the move as a “one-off depreciation” of nearly 2%, based on a new way of managing the exchange rate that better reflected market forces.

It presented the change in the context of free-market reform and said it would also lengthen trading times.
China manages the exchange rate through an official midpoint, from which trade can rise or fall 2% on any given day.

The People’s Bank of China said in a statement it was now basing the midpoint on market makers’ quotes and the previous day’s closing price.
It weakened the midpoint to 6.2298 per dollar on Tuesday, compared with Monday’s 6.1162 mid-point.

At the weekend, China reported a surprisingly heavy fall in exports and a continuing slide in producer prices to a near 6-year low in July.

[B]Intra-day Market Moving News and Views
12 Aug 2015[/B] [I]02:00GM[/I]T

Another round of official devaluation of the Chinese yuan jolted Asian market today, causing a broad-based sell-off in Asian stocks n the commodity currencies - Aussie and Kiwi tumbled to fresh 6-year lows. 

Reuters reported the move by China’s central bank on Tuesday to change the mechanism for setting the daily reference rate for the Yuan “appears a welcome step” as it should allow market forces to have a greater role in determining the exchange rate, the IMF said on Wednesday.

"Greater exchange rate flexibility is important for China as it strives to give market-forces a decisive role in the economy and is rapidly integrating into global financial markets.
“We believe that China can, and should, aim to achieve an effectively floating exchange rate system within two to three years,” an IMF spokesperson said in an emailed statement.

Referring to the IMF’s consideration of whether to include the Yuan, officially called the renminbi, in its Special Drawing Rights (SDRs), the spokesperson said:
“Regarding the ongoing review of the IMF’s SDR basket, the announced change has no direct implications for the criteria used in determining the composition of the basket.
Nevertheless, a more market-determined exchange rate would facilitate SDR operations in case the Renminbi were included in the currency basket going forward.”

[B] Intra-day Market Moving News and Views
12 Jan 2016 [/B] [I]06:41GMT
[/I]
[B]USD/CNH /B - 6.5760… The yuan strengthened again in Asia on continued currency intervention by the PBOC. Reuters reported earlier China’s offshore yuan was trading almost in line with its onshore counterpart on Tuesday, with the offshore yuan implied overnight deposit rate hitting a record high, indicating extremely tight liquidity outside the mainland.

China’s offshore yuan implied overnight deposit rate hit a record high of 94 percent in Hong Kong on Tuesday, with analysts saying the spike was caused by the Peoples’ Bank of China (PBOC) buying yuan offshore to support the currency which drained liquidity.

Hong Kong Interbank Offered Rates for offshore yuan also hit record highs on Monday, as a combination of intervention by China’s central bank and arbitrage drained offshore yuan supply.

Prior to market open, The PBOC set the midpoint rate at 6.5628 per dollar, almost unchanged from the previous fix 6.5626.

The spot market opened at 6.5770 per dollar and was changing hands at 6.5717 at midday, only 0.03 percent weaker than the previous close.

The offshore yuan was trading 68 pips, or 0.1 percent softer than the onshore spot at 6.5785 per dollar.

The spread between onshore and offshore yuan hit its widest level in more than four years to more than 1,200 pips a week before, offering investors the opportunity to arbitrage the rate difference by paying off onshore debt with offshore yuan.

Still, some traders said that market’s expectation of yuan’s depreciation remained unchanged, given that the spread between forward rates in onshore and offshore market are still wide.

The onshore one-year forwards contract was trading at 6.6898, while the offshore one-year forwards contract was trading at a discount of 3.31 percent at 6.9115.

[B]Intra-Day Market Moving News and Views
01 Feb 2016[/B] [I]01:21GMT[/I]

[B]USD/CNH (offshore) [/B]- ...... Dlr climbed vs the yuan after official Chinese manufacturing data was released earlier than official release time. Reuters reported NBS Jan mfg index fell to a near 3-1/2 year low of 49.4 vs forecast of 49.6, previous month's reading was 49.7. In addition, NBS Jan non-mfg index came in at 53.5 vs previous month's reading at 54.4. 

The antipodean currencies (aud n nzd) both fell to intra-day lows of 0.7043 and 0.6449 vs the usd respectively after the downbeat data.

Reuters reported this morning several major hedge funds are piling into bets that China’s currency will decline against the dollar, according to the Wall Street Journal.

Hayman Capital Management has invested about 85 percent of its portfolio in bets against the yuan and the Hong Kong dollar, and Greenlight Capital holds options that pay off if the yuan falls. Hedge fund managers Stanley Druckenmiller and David Tepper have also taken positions against the Chinese currency.

The bets reflect the multitude of pressures on China’s currency, including a slowing economy, unsteady financial markets and persistent capital outflows that have diminished the country’s formidable foreign reserves.
At the same time, the U.S. dollar has risen steadily against other currencies as the relative strength of its economy has compelled the Federal Reserve to raise interest rates for the first time since the 2009 recession.