Emailed 14th August 2015
Well – what can I say – 3rd devaluation by China in three days.
Down 4.65% so far – and still a long way to go.
Charts courtesy of Bloomberg
Vietnam is pegged to the USD – as too other countries and it will not take long for the situation to be a race to the bottom.
Brazil is in trouble – that country will take a pounding – Argentina might was well say ‘fuk it’ – had enough – as a quarter of the country’s $33.7 billion of foreign reserves are in Yuan. So Argentina’s Central Bank picked the wrong horse to invest in and the currency suffered its biggest loss since 1994.
Which other countries are heavily invested in Yuan?
Bank of Japan can now enter the race and continue with their Quantitive Easing – note as I have said on the blog Japan has arbitraged – majority of foreign reserves in USD – so technically they do not have a problem.
Korea? Well they have to devalue – together with the majority of emerging economies – they cannot afford not to.
Vietnam – is watching – well I expect after their decision this morning to increase the trading channel of the Dong by 2 percent – they will be thinking that one straight devaluation of 10 percent may do the trick and allay any further fears – may – then again this is war.
A race to the bottom.
The United Kingdom now feels like a shag on a rock – they are stuck between a rock and a hard place – Ossie has to start really looking at the GBP and wondering WTF. . Time will tell.
The carry trade – well Yuan / EUR hit the trigger point last night – after today’s effort by China the carry trade is well and truly fuked – they now have to convert and start paying back the loans or issuing further capital – what will they do?
If they decide to dump Euro and buy Yuan – the Yuan will increase in value – which is the opposite of what China wants.
So where to from here?
Capital is moving around the globe seeking a safe haven – USD appears to be the only stable solution – so to the USD they go – one by one – increasing the value of the USD and again putting pressure on all countries pegged to the USD.
YOU AIN’T SEEN NOTHING YET.
Enjoy – this is history in the making – this is the real thing – absolutely awesome front row seats to the biggest shit fight in the history of money.
Yahoo – feel like a free fall?
Sent from my iPad