Yuan Depreciation Is Not Trade Related

ZH: Chinese Yuan Suddenly Tumbles
And while there are still those naive "experts" who claim that the Yuan move is not in response to Trump's trade war, or even more laughably that 2018 is in no way like 2015 (for JPM's explanation why 2018 could be far worse than 2015, read this), the next chart makes it quite clear what Beijing is doing to "punish" the Trump administration.
Evidence of a targeted depreciation in the renminbi basket:
What's in the basket? Your guess is as good as any. It sure looks like whatever is in the basket, the basket behaves a lot like the euro.
It's possible China propped up the yuan as part of trade negotiations and removed support when talks deteriorated, allowing the yuan to play catch-up with the euro and EM currencies in 2018. It seems less likely to me that they would allow depreciation given their legitimate fear over a crisis. USDCNY covered half the ground it needs to break 7 over the past month. Trade is undoubtedly playing some role because the Chinese rightly fear what happens in a trade war: dollars stop flowing in, economic growth slows and they run the risk of a deflationary recession amid a deleveraging effort or high inflation/currency depreciation if they let credit growth run wild to stave off recession.

If China manipulated the yuan lower, it has increased the odds and shortened the time to a currency market crisis because A Rising Dollar Will Crush The Yuan.

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