Yuan Believe What Happens Next in the US China Trade War!?

A License to Devalue?

Well well well what do we have here? It seems our friends in Beijing are in a bit of a pickle. CNBC reports that China is unlikely to use a weaker Yuan as a weapon in its trade war with the Yanks. A rather curious development wouldn't you say? One might even call it… unexpected. As I always say 'Never say never again' but it seems this time they are choosing discretion over valour.

The World is Not Enough (Yuan)

Apparently the Chinese offshore Yuan weakened to a record low giving rise to speculation that they might let it slide further to cushion the blow from Trump's tariffs. But alas analysts caution that a significant weakening could cause capital outflows something they're keen to avoid. It seems they've learned a thing or two since 2015 when a similar move triggered nearly $700 billion worth of capital flight. One must admit that's a rather large sum even for a high roller like myself. 'A fortune Mr. Bond,' as Goldfinger would say.

Risky Business

HSBC's Joey Chew says that a rapid devaluation could weaken consumer confidence and risk capital flight. Dan Wang from Eurasia Group echoed this sentiment stating that devaluation is no longer an effective trade weapon and could invite a financial crisis. Capital flight is their top concern and they'll try everything to assure the market that they can defend the Yuan. Quite the tightrope walk isn't it? Though I've walked on tighter with far more at stake I must say.

The Name is Stability Financial Stability

Veteran investor David Roche believes China wants to be seen as the center of stability including the exchange rate. A weaker Yuan could also make it easier for the U.S. as China is their largest supplier of goods. 'The best way to make the Americans pay for this is to keep the currency stable,' he suggests. It seems that for once the sensible course of action is also the most strategic. Who would have thought? Certainly not Blofeld or Dr. No.

Tomorrow Never Dies (But the Yuan Might)

Mizuho's Ken Cheung expects a gradual Yuan depreciation while OCBC's Christopher Wong doesn't rule out "wild swings." However Capital Economics' Jonas Goltermann sees the Yuan depreciating significantly if tariffs remain high. It seems the future of the Yuan is as uncertain as my next mission. Though I must say I usually come out on top. 'Bond. James Bond.' and I always have a plan up my sleeve.

Another Day to Stimulate

Kamil Dimmich suggests China may use domestic stimulus and a stable Yuan perhaps even strengthened by repatriating capital from the US treasury market. The People's Bank of China has reaffirmed its plans for a "moderately loose" policy. All in all it appears China is bracing for heightened uncertainty amid the global trade war. As for me I'll be watching closely martini in hand shaken not stirred. 'The world is not enough,' but a stable Yuan might just be what they need.