Falling CNY sends out another AUD warning

See the latest Australian dollar analysis here:

Macro Afternoon

Another new low for CNY this afternoon:

The AUD has trended in lockstep with CNY since 2015, though the amplitude of the moves are larger.

The AUD can’t charge on in trend term if the CNY goes the other way because the falling CNY hammers EMs and commodities by making China more competitive across the board.

Needless to say, this time around it will not help trade tensions, either.

That said, none of these relationships matter until AUD stops trading as a proxy for the S&P500.

David Llewellyn-Smith

Comments

    • syncpointMEMBER

      Michael Every of Rabobank explains it well

      “The US would at some point realise the USD/Eurodollar was a weapon it could wield vs. China, and when it did we would see three key strings cut: trade; tech; and then capital flows. The first was evident during the trade war – which has not been concluded is likely to get far worse soon; the second is also abundantly clear on a variety of fronts, much to Silicon Valley’s chagrin; and potentially, now we see the start of that third step – because if the US does block this first USD50bn going in, other such steps will follow, just as they did on the previously unthinkable idea of US tariffs on China.”

      https://www.zerohedge.com/markets/rabo-how-we-get-unthinkable-10-handle-yuan

      China is now running a current account deficit and needs to import capital. It’s only access to USD is via exports. If these drop then China needs to devalue to attract capital.

      • Blottridesagain

        It could sell Treasuries?
        Not sure one quarter, that looks a bit cyclical, constitutes a CAD. Aus has had about 240 of them, pretty much in a row, but nobody thinks it is any sort of a problem 🙂

      • And China is making noises that it’s open for foreign investment….. read: “open for china to steal from foreign pasties”.