Chinese Yuan: The Chart That Hasn't Come Down...

Quite often in global macro, a picture can be more powerful than prose. This is one of those pictures.

Why am I calling it out right here and now? Well, the Chinese Yuan traded down overnight to 6.85, putting it down, yes DOWN, for the year to date. While a -0.4% YTD decline is nothing in the context of the currency volatility that we have seen across global macro, the point here is one that matters on the margin. On an annualized basis, this currency hasn’t depreciated since the peg was removed in 2005 (see chart).

This is one surefire way for the Chinese to stimulate export demand. It’s also a leading indicator for more Chinese interest rate cuts to come. Altogether is a new and emerging factor in our multi-factor macro model. We will be expanding upon the consequences of a weaker Yuan later in the week.
KM

Keith R. McCullough
CEO & Chief Investment Officer