The dollar is rising, the metals are collapsing

Contrary to popular beliefs that the dollar is cheaper in times of trade wars, we are seeing the extraordinary strength of the US currency. Earlier this morning, the euro fell to 1.1560 against the dollar and is about to test the critical support at 1.1500. What will happen after this test will most likely depend on the medium-term movement of the single currency.
Otherwise, green money reached a 14-month high against the yuan. China urged a vengeance on Thursday if the US threatens to raise tariffs on exports of Asian-produced goods after US President Donald Trump instructed his trade officials to consider raising customs duties on imported Chinese goods from 10 to 25% of Chinese goods for $200 billion.
But as the US imports much more from China than China from the US, investors see the deployment of the trade war, causing worse trouble for the Chinese economy.
Serious problems due to the appreciation of the dollar have metals. Gold went down this morning near the psychological limit of $1,200 per ounce. Silver is traded at 16.20 dollars per ounce and platinum at $823.

Yuan with strong growth

Over the past week, the Chinese currency has strengthened against the dollar.
The phase of the rapid growth of the renminbi against the US currency was continued despite the pronounced technical overheating and the apparent tightness of this trend.
A new round of strengthening of the renminbi boosted by, including, favorable macroeconomic data for China. The GDP of China increased by 6.8% y/y in the fourth quarter, and by 6.9% in the whole 2017, which significantly exceeded the targets of the government of the country, suggesting about 6.5%. The growth rate of the Chinese economy accelerated for the first time in seven years, which did not remain without the attention of the investment community.
At this stage, the depth of the dollar's sagging relative to the yuan should already keep the investment community on the alert, since the fundamental picture of the US economy is indicative of further monetary tightening this year, and in such conditions the dollar is supposed to win the advantage.

Another devaluation of the RMB: Causes and Consequences (Part 4)

Statement by the People's Bank of China for the new package of measures to tighten control over the work of banks in order to eliminate the shadow banking sector, in this context, is more like a diversion measure, rather than a real promise. China's shadow market poses no particular risk for micro-economic indicators of the country mainly because it is actually not internationally integrated. Cases of fraud with credit lines, decorated as an investment, are plenty in China and whatever actions the regulator takes, it's unlikely to reduce their number - too large is the population and too high is the proportion of small and medium-sized businesses in the economy. However, to direct interests of the banks in the foreign exchange market's side these measures are quite capable.
A poll conducted by Wall Street Journal among investors, has shown that the market does not believe in the cessation of the yuan decline, so invest in the currency most of the major currency players do not see the point. That's why the project to promote the yuan as the foreign currency at the present moment can be called a failure, China will have to start all over again. Most likely, at this time China will go the way of increasing - and thus large interventions in the foreign exchange market in Hong Kong can be expected in the near future.

Another devaluation of the RMB: Causes and Consequences (Part 3)

As for the strengthening of the internal market, then China will definitely have something to brag about. A recent day of sales in China, last November 11 (the so-called Single's Day, an analogue of the Western Black Friday) brought retail chains in China about 17.7 billion dollars, far exceeding the totals in the US Black Friday and Cyber ​​Monday in 2015 (when they were not reached 14 bn). Of course, much of this success belongs to China's advantage in population - 1.5 billion people probably will buy more than 300 million. However, in 2015 Single's Day brought the Chinese traders about 14.6 billion dollars - which means, that in 2016 the Chinese consumer activity increased by 1/6, while the boldest forecasts for Black Friday and Cyber ​​Monday in the US this year cannot exceed 15 billion. Of course, for the market it is a clear signal that China is a growing market for the long term, however, whether US and European investors will hear it - it is a big question. While they prefer to ignore the investment instruments, related both to the Chinese currency, and with Chinese companies (with the exception, perhaps, of bonds, although the announced issue of Eurobonds of a number of international Chinese companies do not enjoy special demand). For now the Chinese authorities manage to keep the outflow of capital from the country under control, but recent events related to the foreign exchange value of the yuan, could put the effectiveness of external investment management of China under question.

Another devaluation of the RMB: Causes and Consequences (Part 2)

On the other hand, the decline is typical for all Asian currencies. The main factors of this movement began in the first place, the mass selling of US debt, rising dollar and the weakening of the European currency. As a result, investors have shifted to work with the dollar, the market expects the Fed raising rates and the consequent further rise in the US currency, and no one looks at the Asian currencies. The volume of trading after the announcement of the devaluation of the yuan and its revaluation in fact has not changed, either in Shanghai or Hong Kong. On the Russian stock exchange these days it has been sold and bought the total amount of 10 to 19 million rubles of the Chinese currency, trading on the Hong Kong Stock Exchange demonstrates rare consistency - the yuan persistently reduced by 0.1-0.2% per day, with trading volumes in fact unchanged. It sais only that both international and Chinese investors do not believe in renminbi as a mechanism for currency speculation, so the prospects for the yuan to become the second reserve currency in two years (since the proposal from the IMF to the Chinese authorities of that possibility), haven't advanced at all.

Another devaluation of the RMB: Causes and Consequences (Part 1)

China remains faithful to the chosen course and periodically devalue the yuan. China's national currency has lost 12 consecutive sessions, and as a result, by early November the dollar was worth more than 6.9 yuan. So cheap the yuan was not worth since 2008. China's central bank stopped this trend only recently, raising the so-called reference value of the currency by 0.3%. However, that did not helped the general trend of the Chinese currency. Will it help in the future, and most importantly - is approaching or moving away the time when the Chinese currency will cease to be an exotic?
On the one hand, the behavior of the Chinese financial authorities, until recently, is quite consistent with the chosen strategy of the country to maintain the internal market and to create the most transparent environment for speculative operations with currency. Currency trading with the yuan on the mainland Exchange (Shanghai Currency Exchange) are inert - they are strictly regulated by the Central Bank. Trading on the Hong Kong Stock Exchange fully justified the possible settlement of the Chinese authorities to attract players for a fall. Even after the news about the increase in the reference value of the yuan against the dollar in Hong Kong, it continued to fall.

China hopes for recovery of the yuan with the Fed rates rise

The likely rate hike in December from the US central bank will have limited impact on declining in anticipation of the Fed's steps yuan, said on Tuesday the chief economist of the Bank of China.
Ma Jun said at a dinner with a small group of foreign journalists that the Chinese national currency is under pressure, weakening in the eve of the Fed's tightening policy, but it can be restored after the US Federal Reserve finally raise rates.
From the end of September, the yuan fell more than 1.5 percent against the US dollar, and some market participants are getting firm in anticipation of further reduction.
The official regulator said that in spite of this, the yuan in October has remained stable to a basket of currencies, which shows China's commitment to its new currency regime.
Ma added that the city authorities have recently taken action against the growth in property prices, which should cool the market and reduce the demand for mortgages. The official said that the Bank of China's monetary policy will examine the likely impact on the real estate sector.
He added that he is expecting a growth of the Chinese economy, the second largest in the world, by about 6.7 per cent this year.

Dollar at 8-month peak on expectations the Fed raising rates

The dollar rose on Monday to a new eight-month high against major currencies, supported by expectations of raising interest rates before the end of the year.
The dollar index, which tracks the US currency against a basket of six major rivals, rose by 0.1 percent to 98.718, after rising up to the level of 98.846, its highest level since February, 3rd.
Last Friday, the head of the Federal Reserve Bank of San Francisco John Williams repeated his appeal for rapid increase in Fed rates, telling reporters that "this year eligible" for the tightening of monetary policy.
His comments were preceded by "hawkish" statements and other central bank officials, including the president of the Federal Bank of New York William Dudley and Fed Vice Chairman Stanley Fischer.
Quotations of futures on the federal funds rate show that the market assesses the likelihood of Fed rate increase in December to 70 percent.
The dollar also received a support by a recent poll, according to which US presidential candidate from the Republican Donald Trump loses against representing Democrats Hillary Clinton on the eve of the elections on 8 November.
The euro weakened by 0.1 percent to $ 1.0874, approaching Friday's low of $ 1.0857, the lowest level since March 10.
Against the Japanese yen the dollar gained 0.1 percent, rising to 103.86 yen.
Published on Monday data showed that Japan's positive foreign trade balance in September is at the level of 498.3 billion yen ($4.8 billion) against the average forecast of 341.8 billion yen.
Offshore yuan, trades in which are held outside of mainland China, updated six-year low against the dollar after weakening of the yuan in the market of mainland China on the background of the growth of the dollar index.

The third wave of devaluation of the yuan is in full swing

It seems that the world is on the verge of another currency "war". Chinese Yuan in early summer renewed the lows again in pair with the US dollar, of course, not independently, but under the strict guidance of the People's Bank of China. China's regulator returned to its controlled currency devaluation to reduce the negative impact of the massive outflow of capital from the country. During 2015 China lost about $500 billion, about the same number are expected in the current year. This is "hot" money, which are present in some amount in each developing economy, but returned to the owner with the expansion of the spread in interest rates. Now that China stimulates its economy, while the US Federal Reserve is ready to toughen the terms of monetary policy, the currencies of developing economies may again come under pressure.