Emailed 11th August 2015
In my last email I warned that when currency wars come into play then protectionism usually follows.
I researched more on the Chinese devaluation – then received this little piece – From Reuters
RTRS – CHINA TO RESUME 13 PCT VALUE ADDED TAX RATE ON FERTILISER IMPORTS AND SALES FROM SEPT 1 – GOVT
Be alarmed – be very alarmed – as the Chinese Government has brought out the bazooka’s and are seeking to ease the value of their currency against the USD but also introduce tariffs on imported goods.
This is a test of the markets – the Chinese Government and the PBoC have introduced not one, but two measures… THEY ARE TESTING THE MARKET FOR REPERCUSSIONS … in both devaluation and tariffs at the same time.
The problem is – it will not work as the USD is not gun (bazooka shy) – all the bad news from the U.S. dents the value of the dollar – but (yes I love buts) the currency action by all currencies is just driving more and more monies into the USD – result …. you work it out.
Nothing changes for the Yuan – in fact it is the commodity exporting countries that are suffering.
Australia – Canada – Brazil …. watch out below as Chinese devaluation impacts these countries.. nothing no one can do about it.
So peoples – expect a further devaluation in the not to distant future – watch the Bank of Japan and Bank of Korea in this mix as these near neighbors WILL HAVE TO DEVALUE – then if this happens the trigger point for a collapse of the Yen and Yuan carry trade happens.
Ever heard of the phrase Target Redemption Forward?
Well it is the carry trades worst nightmare – and if the tipping point is reached in the next devaluation by China – all shit will break loose. It will be a currency carnage that will bankrupt a fair few carry funds – and the winner will be – USD.
And mark my words – CHINA WILL DEVALUE AGAIN…….
I hope you all heeded my words on my favorite currency at the moment.
Sent from my iPad