Home » Posts tagged 'yuan'

Tag Archives: yuan

Iraq is the latest nation in the Global South to move away from the US dollar in bilateral trade with China

https://media.thecradle.co/wp-content/uploads/2023/02/Yuan.jpg

(Photo credit: AFP)

The Iraqi central bank announced on 22 February that, for the first time, it plans to allow trade from China to be settled directly in yuan instead of the US dollar to improve access to foreign currency.

“It is the first time imports would be financed from China in yuan, as Iraqi imports from China have been financed in (US) dollars only,” the government’s economic adviser, Mudhir Salih, told Reuters on 22 February.

According to a statement released by the Iraqi central bank, carrying out transactions in the Chinese currency would boost the balances of Iraqi banks with accounts with Chinese banks.

However, this option depends on the size of the central bank’s yuan reserves.

A second option to boost local banks’ yuan balances would involve converting US dollars held in the central bank’s accounts with JP Morgan and the Development Bank of Singapore (DBS) to yuan before paying the final beneficiary in China.

The Iraqi central bank has been on a mad dash to compensate for a dollar shortage in local markets. This crisis prompted the cabinet to approve a currency revaluation earlier this month.

Last year, the US Treasury and the Federal Reserve Bank of New York began enforcing stricter controls on international transactions by Iraqi commercial banks, forcing them to comply with specific SWIFT global transfer system criteria to access their foreign reserves.

The move was allegedly meant to “curtail money laundering and the illegal siphoning of dollars to Iran and other heavily sanctioned [West Asian] countries.” However, the sudden rules change for Iraqi banks sent the economy reeling as 80 percent, or more of Iraq’s daily US dollar wire transfers could no longer be completed.

…click on the above link to read the rest…

Zoltan Pozsar: G7 Investors Should Worry About Gold-Backed Renminbi Eclipsing Dollars, Commodity Encumbrance

December 29, 2022

Zoltan Pozsar: G7 Investors Should Worry About Gold-Backed Renminbi Eclipsing Dollars, Commodity Encumbrance

Credit Suisse contributor Zoltan Pozsar has continued his ongoing series about Bretton Woods III where commodities will dictate the new world order. For his last dispatch of the year, he described how the world is now shifting to a multipolar order “being built not by G7 heads of state but by the ‘G7 of the East’ (the BRICS heads of state).”

BRICS stands for the group of five nations: Brazil, Russia, India, China, and South Africa. But Pozsar said that with the poised expansion via rumored applications for Saudi Arabia, Turkey, or Egypt, he took the liberty to round up the current “G5.”

The author focused on Chinese President Xi Jinping’s speech at the recent summit in the Arab states, which for Pozsar is very telling on how Beijing plans to outmaneuver the West in global economy.

“Fixed income investors should care – not just because the invoicing of oil in renminbi will hurt the dollar’s might, but also because commodity encumbrance means more inflation for the West,” Pozsar said.

In the next three to five years, China is ready to work with GCC [Gulf Cooperation Council] countries in the following priority areas: first, setting up a new paradigm of all-dimensional energy cooperation, where China will continue to import large quantities of crude oil on a long-term basis from GCC countries, and purchase more LNG. We will strengthen our cooperation in the upstream sector, engineering services, as well as [downstream] storage, transportation, and refinery. The Shanghai Petroleum and Natural Gas Exchange platform will be fully utilized for RMB settlement in oil and gas trade, […] and we could start currency swap cooperation and advance the m-CBDC Bridge project.

Pozsar quoted Xi’s speech

…click on the above link to read the rest…

What? Default? Where? Dollar?

July 27, 2020

What? Default? Where? Dollar?

It won’t come as a surprise to anyone that the first half of 2020 has brought, among many other things, renewed calls for the demise of the US dollar. It’s been pretty much a non-stop call for over a decade now, and longer. But this time, like all previous ones, I’m thinking: I don’t see it. I guess my first question is always: please explain why the dollar would collapse before the euro does.

For one thing, the dollar would have to collapse/default against one or more “entities”. The dollar is not like one of those highrises that collapse upon themselves. It will have to default or collapse against something(s) else. Since it is the world reserve currency, that means there would have to be a replacement reserve currency. Yes, that could also be for example gold or SDR’s, or even a basket of currencies, and something like that may happen eventually, but it doesn’t appear in the cards in the short run.

There are really only two candidates for the role, and neither looks at all fit to play it. The euro may have some ambitions in that direction, but it has far too many problems still. The yuan/renminbi certainly has such ambitions, but the Communist party refuses to let it get on stage to show what it’s got. As I recently wrote:

The main sticking point for Beijing is a conundrum it cannot solve. The CCP wants to have BOTH a global currency AND total control over that currency. It will have to choose between the two, and cannot make up its mind. So it pretends it doesn’t have to choose.

…click on the above link to read the rest of the article…

Crude Crashes As Asia Trading Opens; Stocks Slump, Gold Jumps, Yuan Dumps

January 26, 2020

Crude Crashes As Asia Trading Opens; Stocks Slump, Gold Jumps, Yuan Dumps

While gold is spiking higher and stocks are getting hammered lower after a weekend of ugly headlines surrounding the lethality and spread of the novel coronovirus, the Saudis are desperately talking down the crash in crude oil prices…

Brent is back below $60 and WTI has crashed to almost a $51 handle…

Saudi Arabia is “closely monitoring” the impact of the coronavirus outbreak on oil markets, but so far sees the crisis having a “very limited impact” on global demand, Energy Minister Prince Abdulaziz bin Salman says in a statement.

Current market impact on oil, “primarily driven by psychological factors and extremely negative expectations adopted by some market participants, despite its very limited impact on global oil demand.”

It seems that “psychological” impact is sending gold higher…

And stocks lower… Dow futures down over 300 points, back below 29,000…

And S&P futures back below the key 3,300 level…

…click on the above link to read the rest of the article…

Powell Rate Cut Unleashes Volatility Tsunami

August 11, 2019

Powell Rate Cut Unleashes Volatility Tsunami

It wasn’t supposed to work this way.

In the rate cut playbook envisioned by Trump, Powell’s July 31st rate cut was supposed to send stocks higher while crushing the dollar. However, when the FOMC announce a “mid-cycle”, 25bps cut, the outcome was not only a surge in the dollar but also a surge in volatility not seen so far this year.

The sequence of events is familiar to all by now: at first, Powell’s rate cut spooked the market which had been expected either a 50bps cut, or an explicit promise of an easing cycle. It got neither, and neither did Trump, who the very next day realized that with the Fed now explicitly focusing on global uncertainties, read trade war, as a catalyst for future rate cuts as demonstrated by the following infamous chart…

…. decided to escalate the trade war with China by announcing 10% tariffs on the remaining $300BN in Chinese imports, sending stocks and bond yields plunging, and the market pricing in as much as 100bps of more rate cuts in 12 months, forcing Powell to cut far more than just another 25bps or so as the Fed Chair suggested in the July FOMC meeting.

China immediately retaliated by devaluing the Yuan below 7.00 for the first time since 2008 and halting US ag imports, which in turn prompted the US Treasury to declare China a currency manipulator. Meanwhile, China’s yuan devaluation means the White House is set to unveil even higher tariffs, resulting in an even weaker yuan, and so on, in a toxic feedback loop that may soon escalate the trade and currency war into an all-out shooting war.

…click on the above link to read the rest of the article…

Currency War Begins: Chinese Yuan Crashes Past 7 To New Record Low; Global Markets Tumble After Beijing Suspends US Agri Imports

August 5, 2019

Currency War Begins: Chinese Yuan Crashes Past 7 To New Record Low; Global Markets Tumble After Beijing Suspends US Agri Imports

Update 3: The carnage from yuan volatility is starting to spread…

Chinese bond yields are tumbling…

Dow futures are down 300 points…

S&P futures below 2900…

UST yields are collapsing…

And the yield curve is cratering…

* * *

Update 2: – China’s central bank has confirmed that it is, indeed, on, saying that it is able to keep the yuan exchange rate at a reasonable and balanced level – whatever that means – while acknowledging that the Yuan plunging beyond 7 per dollar is due to market supply and demand, trade protectionism and expectations on additional tariffs on Chinese goods.

Meanwhile, resorting to its old, tired and worn out tricks, Dow Jones reports that the PBOC will crack down on short-term Yuan speculation, and anchor market expectations.

Which is great… if only the PBOC didn’t say exactly the same back in May, when it warned currenct traders that those “shorting the yuan will inevitably suffer from a huge loss.“

Three months later, it’s currency traders 1 – Beijing 0.

* * *

Update 1 – China is firing all the big guns tonight, because just an hour after Beijing effectively devalued the yuan, when it launched the latest currency war with the US, Bloomberg reported that the Chinese government has asked its state-owned enterprises “to suspend imports of U.S. agricultural products after President Donald Trump ratcheted up trade tensions with the Asian nation last week.”

China’s state-run agricultural firms have now stopped buying American farm goods, and are waiting to see how trade talks progress.

Translation: trade talks, even the fake kind, is now over, dead and buried, and the only question is how Trump will react.

* * *

…click on the above link to read the rest of the article…

The Dying Days Of An Empire

June 27, 2019

The Dying Days Of An Empire

Caravaggio **Conversion on the way to Damascus** 1600-01

Something’s been nagging me for the past few days, and I’m not sure I’ve figured out why yet. It started when Donald Trump first called off the alleged planned strikes on targets in Iran because they would have cost 150 lives, and then the next day said the US would do sanctions instead. As they did on Monday, even directly targeting Trump’s equal, the “Supreme Leader Khameini”.

When Trump announced the sanctions, I thought: wait a minute, by presenting this the way you did, you effectively turned economic sanctions into a military tool: we chose not to do bombs but sanctions. Sounds the same as not doing a naval invasion but going for air attacks instead. The kind of decisions that were made in Vietnam a thousand times.

However, Vietnam was all out war (well, invasion is a better term). Which shamed the US, killed and maimed the sweet Lord only knows how many promising young Americans as well as millions of Vietnamese, and ended in humiliating defeat. But the US is not in an all out war in Iran, at least not yet. And if they would ever try to be, the outcome would be Vietnam squared.

Still, that’s not really my point here. It’s simply about the use of having the world reserve currency as a military weapon instead of an economic one. And I think that is highly significant. As well as an enormous threat to the US. The issue at hand is overreach.

While you could still argue that economic sanctions on North Korea, Venezuela and Russia are just that, economic and/or political ones, the way Trump phrased it, comparing sanctions one on one with military strikes, no longer leaves that opening when it comes to Iran.

…click on the above link to read the rest of the article…

Has China Finally Lifted its Thumb off of Gold?

October 19, 2018

Has China Finally Lifted its Thumb off of Gold?

There’s a lot of talk about the Yuan price of gold falling out of a price suppression channel. Both Zerohedge and Nomura have weighed in on this.

The Yuan price of gold surged overnight to above CNY 8500 per ounce which is a major breakdown But it’s also indicative of something that has long been suspected during this gold bear market.

China doesn’t want the price of gold to rise. Those accumulating gold — China and Russia — have zero incentive to accumulate at higher prices. And the gold chart of the last three years bears out that they have had to come in at higher prices on pullbacks because market bottoms keep coming in higher and higher.

The 2015 low was around $1050. 2016 at $1146. 2017 the low after a pullback in July couldn’t breach $1208 during a strong post-U.S. election rally. This year the price was briefly pushed below $1200 in the longest downtrend of the seven year bear market but has since popped back over $1230 with its sights now set on $1250.

China may have no choice here but to let the price of gold rise. Because conditions in other markets are changing rapidly. So, ultimately, what China wants really may not matter anymore.

Remember, the eurodollar markets broke in late May this year as Jeffrey Snider at Alhambra Partners reminds us daily.

The PBoC cut the reserve ratio again recently to free up liquidity in Chinese banks but it doesn’t seem to have stemmed the tide. And that’s why it has continually loosened the Yuan fix rate, now approaching 7 vs. the U.S. dollar.

Offshore dollar markets are the pool of real savings in the global economy and it determines where we are headed. And the offshore dollar hoarders are pulling out of China… and Europe… and Japan…. and South America.

…click on the above link to read the rest of the article…

Market crash? Another red card for the economy

October 13, 2018

Market crash? Another red card for the economy

A few months ago I wrote this article at the World Economic Forum called “A Yellow Card For The Global Economy“. It tried to serve as a warning on the rising imbalances of the emerging and leading economies. Unfortunately, since then, those imbalances have continued to rise and market complacency reached new highs.

This week, financial markets have been dyed red and the stock market reaction adds to concerns about a possible impending recession.

The first thing we must understand is that we are not facing a panic created by a black swan, that is, an unexpected event, but by three factors that few could deny were evident:

Excessive valuations after $20 trillion of monetary expansion inflated most financial assets.
Bond yields rising as the US 10-year reaches 3.2%
The evidence of the Yuan devaluation, which is on its way to surpass 7 Yuan per US dollar.
Global growth estimates trimmed for the sixth time in as many months.

Therefore, the US rate hikes – announced repeatedly and incessantly for years – are not the cause, nor the alleged trade war. These are just symptoms, excuses to disguise a much more worrying illness.

What we are experiencing is the evidence of the saturation of excesses built around central banks’ loose policies and the famous “bubble of everything”. And therein lies the problem. After twenty trillion dollars of reckless monetary expansion, risk assets, from the safest to the most volatile, from the most liquid to the unquoted, have skyrocketed with disproportionate valuations.

(courtesy Incrementum AG)

Therefore, a dose of reality was needed. Monetary policy not only disguises the real risk of sovereign assets, but it also pushes the most cautious and prudent investor to take more risk for lower returns. It is no coincidence that this policy is called “financial repression“. Because that is what it does. It forces savers and investors to chase beta and some yield in the riskiest assets.

…click on the above link to read the rest of the article…

Beijing Eases Policy, Yuan Slides Towards 10-Year Low

October 8, 2018

Beijing Eases Policy, Yuan Slides Towards 10-Year Low

On Sunday, the Bank of China cut the level of cash that banks must hold as reserves. The Yuan continued its slide.

Reuters reports China Set to Reopen After Beijing Eases Policy.

Shares in Asia stumbled in early trade on Monday as investors waited with bated breath as China’s markets prepare to reopen following a week-long holiday and after its central bank cut banks’ reserve requirements in a bid to support growth.

Investors will be focused on markets in China, following a decision on Sunday by the People’s Bank of China (PBOC) to cut the level of cash that banks must hold as reserves in a bid to lower financing costs and spur growth amid concerns over the economic drag from an escalating trade dispute with the United States.

Reserve requirement ratios (RRRs) – currently 15.5 percent for large commercial lenders and 13.5 percent for smaller banks – would be cut by 100 basis points effective Oct. 15, the PBOC said, matching a similar-sized move in April.

Trade War

China said it would not devalue the yuan in response to a trade war. Actions speak louder that words.

ZeroHedge comments Yuan Set To Plunge Below PBOC “Red Line”.

The CNH is once again dangerously close to the PBOC’s redline of 7.00, with 3-month USD/CNH points, which have reached their highest this year, suggesting that a breach of that level is increasingly probably and implying a CNH yield of around 2% above equivalent USD 3-month rates. At the same time, the 1-year forward is also flirting with 1,000 pips, another signal that traders see a weaker yuan. The rate of appreciation in the forward curve this month is the quickest since June, when the U.S.-China trade war crossed the Rubicon.

…click on the above link to read the rest of the article…

“Something Has to Break” as China’s Onshore Defaults Hit a New Record

October 4, 2018

“Something Has to Break” as China’s Onshore Defaults Hit a New Record

Recent news from China has been really ugly.

But what can you expect? They’re trying to fight a trade war against the U.S. – deal with slowing growth – and survive against a stronger U.S. dollar.

And because of these problems – China’s major stock exchanges have really suffered this year.

But – contrary to what the mainstream says – I think things are going to get much worse. . .

For starters – the latest Chinese Manufacturing PMI (purchasing manager index) showed a continued downturn. Both in the NBS and Caixin Indexes.

Clearly the trade-war with the U.S. is being felt. And with little progress in negotiations between the U.S. and China – expect the near-and-midterm to continue being weak.

Now – Unfortunately – this slow down in the Chinese economy and the loss of sales and income are coming at a bad time. . .

Especially for their corporations.

The combination of a slowing economy, a stronger dollar, and a tightening Federal Reserve is putting pressure on indebted Chinese firms.

This is putting China’s elites between a rock and a hard place. . .

That’s because with the trade-war raging on and a tightening Fed – the Communist Party of China will want to ease and help their economy.

The Peoples Bank of China (the Chinese central bank) can cheapen the yuan to try and boost exports. And as I wrote before – the weaker yuan will offset Trump’s tariffs.

For example – if the U.S. places 20% tariffs on all Chinese goods – China simply must devalue the Yuan by 20%. This would offset the increased costs from the tariffs – keeping the price for U.S. consumers unchanged. Basically rendering the imposed tariff worthless.

But the problem with this is Chinese firms have significant dollar-denominated debts. So a stronger dollar makes their debt-burden much harder to service.

…click on the above link to read the rest of the article…

Is China Losing Control? Yuan More Volatile Than Euro For First Time Ever

August 30, 2018

Is China Losing Control? Yuan More Volatile Than Euro For First Time Ever

As Bloomberg notes, the offshore yuan has been more volatile than the euro all month after first overtaking the shared currency in July, according to 30-day realized data. And while euro uncertainty remains relatively bracketed between 6 and 8 for the last two years, yuan volatility has soared from 2 to almost 9 – the highest since 2015’s devaluation.

The narrow spread (lower pane) shows China is moving to a more “flexible arrangement” when it comes to managing its currency, Bank of America analysts wrote in a note, predicting the yuan will weaken more this year.

For now it appears the temporary respite from Yuan’s freefall, that ‘mysteriously’ occurred right before the US-China trade talks, has begun to lose momentum.

But while Yuan has become increasingly volatile, the realized volatility of gold (when priced in yuan) has collapsed to record lows…

Perhaps supporting the idea that the Chinese care more about the ‘stability’ of the yuan relative to gold then to the arbitrary US dollar fiat money.

So is China losing control? Or is this just as they planned?

“Virtually Everybody Knew This Was Coming”

August 16, 2018

“Virtually Everybody Knew This Was Coming”

Was it Turkey’s “executive presidency” and its unwillingness to hike rates in the face of soaring inflation? Or maybe the record global debt accumulated over the past decade? Maybe the artificially low interest rates? Or perhaps it was the pervasive current account deficits amid easy outside capital. How about the rapid slowdown in China, its escalating trade war with the US, and the Yuan devaluation? Or perhaps it’s just the rising US interest rates and global quantitative tightening soaking up billions in excess liquidity?

However one justifies the current emerging market crisis, one thing is clear “virtually everybody knew this was coming.”

At least that’s the common theme according to SocGen’s Albert Edwards, who after an extended absence has returned, with a new note looking at the turmoil gripping the EM sector. It’s hardly new territory for the SocGen strategist, who prior to his current role, was most famous for his correct predictions and observations on the Asian Financial Crisis of 1997.

Fast forward some 21 years, when the veteran SocGen strategist believes the current turmoil boils down to two things: the Fed’s ongoing tightening – a point we discussed earlier this week in “Forget About Turkey: Asia Is The Elephant In The Room” – and China’s rapid devaluation. Turmoil, which as Nedbank noted previously, is about much more than just Turkey, which is merely the symptomatic “tip of the iceberg.”

Here’s Edwards’ take on where we stand:

Many commentators have thought for some time that Turkey was a macro-accident waiting to happen. But the key issue is not Turkey’s idiosyncratic macro problems. The unfolding crisis in EM is the direct result of Fed tightening and the strong dollar. The Fed always raises rates until something breaks.

…click on the above link to read the rest of the article…

Gold Yuan Crypto

August 4, 2018

Gold Yuan Crypto

George Caleb Bingham The verdict of the people 1854

It’s been a while since we last heard from Dr. D, but here he’s back explaining why neither gold nor the yuan nor cryptocurrencies can or will replace the dollar as the reserve currency, but together they just might:

Dr. D: “Some debts are fun when you are acquiring them, but none are fun when you set about retiring them.” –Ogden Nash

Over the last year or two there’s been discussion about the U.S. Federal spending moving beyond $4 TRILLION dollars, and whether a $1+ trillion dollar annual deficit, on top of a $20 Trillion national debt – Federal only – is sustainable. It isn’t.

“What can’t go on, doesn’t” is the famous quote of economist Herbert Stein. Since a spiraling deficit of $1 trillion deficit on a $20 trillion debt can’t go on, what will we replace it with when it very soon doesn’t? Historically gold. Whatever gold exists in the nation’s coffers, whether one coin or 8,000 tons, is used to as the national wealth, and fronted by paper to re-boot the currency. With some additions such as oil and real estate, this was the solution in Spain, France, Germany, and the Soviet Union among hundreds of fiat defaults. Why? Because at a time of broken promises — real goods, commodities that can be seen, touched, and used – are the tangible proof of wealth, requiring no trust, and from which the human trust system of paper and letters of credit can be rebuilt.

But in these complicated, digital times perhaps that’s too simplistic. Perhaps we have grown smarter than all our fathers and this time it will be different. Will it really be the same? Let’s look at how the system works now.

…click on the above link to read the rest of the article…

Has the PBoC deliberately weakened CNY as part of the trade war?

June 30, 2018

Has the PBoC deliberately weakened CNY as part of the trade war?

It has been another trade war week, as the market has been looking for clues on the Chinese retaliation measures against the Trump tariffs that are planned to go live on 6 July.

Global trade momentum started to weaken even before the trade conflict escalated. The three months from February until April marked the weakest running 3-month period for world trade since early 2015. A bad sign given that the period included a temporary cease-fire between Trump and Xi Jinping. Usually it adds downwards pressure on 10yr bond yields, when world trade is slowing (at least initially). A further slowdown of global trade in June/July/August could keep long bond yields under pressure over the summer. In other words, the trade war fog needs to dissipate for the 10yr US Treasury yield to unfold its upside potential to the range between 3.25%-3.50% (Major Forecast Update: USD to remain in the driving seat)

Chart 1: Less global trade, lower long bond yields

Last week we wrote that we found trade-based Chinese retaliation measures more likely than attempts to retaliate via the financial markets. The fact that Trump is threatening with new tariffs on goods worth a total of USD 450bn makes the retaliation process trickier for China. It is simply not possible to retaliate symmetrically, as there are not enough US exports into China to tax. This leaves an elevated risk of unorthodox retaliation measures being used. Prohibiting symbolic US products from entering Chinese territory could be one way of doing it. Expect more clarity on whether Xi Jinping will deliver an ALL-IN answer as early as this weekend.

…click on the above link to read the rest of the article…

Tag Archives: yuan

Content

Post categories

Economic Links

Energy/Resource Links

Environmental Links

Geopolitical Links

Liberty Links

News Links

Other Links

Survival Skills

Post Archives by Category

Chart 1: Less global trade, lower long bond yields

Post navigation

Latest Posts