As the US Dollar (USD) has strengthened in recent weeks, its strength against the Chinese Yuan Renminbi (CNY) logically has responded in kind and the CNY fell, moving from about 6.45 at the end of March to about 6.58 at the end of May (yes, that’s a ‘big’ move for the USDCNY). The latest “devaluation” of the CNY is driving some commentators to dredge up memories of last year where all sorts of fears about a rapid devaluation and capital flight were stirred up. So what’s the outlook? And will this be a source of volatility for global markets again?
One thing to note is that so far people appear to have lost interest in this issue, as indicated by the google search indicator for “USDCNY”. It makes sense because how the USDCNY moves is more important than the direction it moves: a slow and steady devaluation of the CNY would be a positive for China’s exporters and may avoid a rapid surge in demand to get capital out of the country, while a rapid and disruptive move would create issues domestically and globally. Click here to read more.
By: Callum Thomas | Source: AMP Capital | 07 June 2016
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