USDCNH PBOC Devaluation

2016년 8월 31일

The PBOC’s task becomes increasing difficult with a strong USD since China decided to hitch its star to the USD. China from the 1980’s until now has exported goods and capital to America. The DXY Index (US Dollar Currency Index) weakened to a low of 72.00 in Spring 2008. Since then, it has rallied over 33%. The CNY has strengthened 5% in USD terms and manufacturing wages are up 128% over the same time period. In FX terms, Chinese goods are 38% more expensive, and profit margins of manufacturers are collapsing. Further USD strength will be crippling to the economic base of China. A strong USD also intensifies capital outflows as rich citizens rush to convert their wealth into a strong and rising USD.

Each time the Fed has thought about or actually completed a rate hike, China has responded forcefully by devaluing the Yuan.

We expect PBOC to further devalue their currency in response.

2016년 12월 27일

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