Fed Ripples? Yuan Tumbles To 2017 Lows As Chinese Money Market Liquidity Dries Up (Again)
In what could be the beginning of ripples from The Fed’s jawboned ‘certainty’ of a March rate-hike, Chinese money market liquidity conditions appear to be drying up once again as overnight offshore yuan rates surge 142bps to one-month highs.
Additionally, 1-week CNH Hibor +1.05 ppts to 4.53017%; and 1-month CNH Hibor +70bps to 4.9395%
At the same, spot offshore Yuan rates have plunged to their lowest since January 4th’s massive short squeeze.
As it appears 2017 is Shangahi Accord Redux time – (China ‘agrees’ to weaken the Yuan against non-USD currencies, while “stabilizing” the Yuan against the USD… until that breaks)
The question is – will a sudden renewed but of volatility in credit markets (high yield crashed this week), commodity markets (crude and copper collapse this week), emerging market stocks (tumbling), and now China money markets, be enough to stall a determined Fed, and crush their credibility once and for all?