Chinese Monetary History Rhyming or Repeating

The last time the PBoC allowed a drop in MLF it switched to using the RRR in April 2015. Three months later came the "surprise" depreciation in the yuan. In April 2018, the PBoC again allowed MLF to contract and switched to using the RRR. While history may not be repeating, it is definitely rhyming.

Here's a look at the euro and yuan currency ETFs (FXE and CYB). The U.S. dollar rally that began in June 2014 was powered by a relative depreciation in the euro, but the yuan was stable until August 2015. Since August 2015, the yuan largely tracked with the euro, until 2018.

Unless conditions reverse, accelerated depreciation in the yuan is on the way.

A rally in USDCNY is bearish for emerging markets.