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Currency War: U.S. Hedge Funds Mount New Attacks on China's Yuan

wsj.com

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Re: Currency War: U.S. Hedge Funds Mount New Attacks on China's Yuan

#21

Post by ctrl_freak »

GreaterFool wrote: post #6

Isn't everyone and their dog trying to devalue their currency these days to boost exports? What's the problem with weak yuan? Sure, iPhones will get even more expensive to buy in China (rather funny since they are made there) but other than that it should be a boon to exports, no?

All other things being equal, a weak currency is a good thing for a country. Unfortunately for China, a weak currency comes with a host of other problems, one of the most significant is capital outflow:

http://www.bloomberg.com/news/articles/2015-09-25/china-capi...

Re: Currency War: U.S. Hedge Funds Mount New Attacks on China's Yuan

#22

Post by coliveira »

Analemma_ wrote: post #4
melling wrote: post #2

Will this be a replay of Soros "Breaking the Bank of England"? http://dealbook.nytimes.com/2010/06/04/when-soros-decided-to...

They're trying to do the same time thing as Soros did, yes. But even after its recent $300 billion spending spree to defend the yuan, China still has trillions in foreign currency reserves left, orders of magnitude more than the BoE ever did. And they have a cultural imperative against "giving in" to Western capitalist pigs. I really don't think these guys have thought their plan through.

That is all the worse for China, and will only serve to increase the size of the bet against the Yuan. When it comes to currencies, there is nothing that can fix the law of supply and demand. The country can spend huge fortunes avoiding the direction of the market, but it will only make things worse when the fall finally comes. I believe Soros and his friends will make a lot of money here.

Re: Currency War: U.S. Hedge Funds Mount New Attacks on China's Yuan

#23

Post by memracom »

GreaterFool wrote: post #6

Isn't everyone and their dog trying to devalue their currency these days to boost exports? What's the problem with weak yuan? Sure, iPhones will get even more expensive to buy in China (rather funny since they are made there) but other than that it should be a boon to exports, no?

Seems to me that the real driver of currency devaluation is the price of oil. By devaluing you protect your economy from big shocks because the price of oil stays unchanged, in the local currency. Russia did the same and has managed to maintain an economic boom in manufacturing, new industry, and hight tech military hardware.

You can't pay attention only to numbers. You have to factor in culture, and a culture of hard work and innovation will beat the numbers every time. Not saying that they might not suffer a bit, but lets not forget that economy is a cyclic thing. What goes down will come up before too long because very smart people are hedging against all possibilities.

Re: Currency War: U.S. Hedge Funds Mount New Attacks on China's Yuan

#24

Post by sharetea »

Pretty easy bet:

China Capital Outflows Rise to Estimated $1 Trillion in 2015

http://www.bloomberg.com/news/articles/2016-01-25/china-capi...

Chinese banks' new bad loans more than doubled in 2015

http://www.reuters.com/article/us-china-banking-npl-idUSKCN0...

China Crash: $28 Trillion Debt Load Forces Credit Crunch

http://www.breitbart.com/national-security/2016/01/05/china-...

Capital flight pushes China to the brink of devaluation

http://www.telegraph.co.uk/finance/china-business/12088033/C...

Mark Hart: The Yuan Devaluation Still Has 50% To Go

http://www.valuewalk.com/2016/01/mark-hart-the-yuan-devaluat...

Re: Currency War: U.S. Hedge Funds Mount New Attacks on China's Yuan

#25

Post by Lazare »

jeffwass wrote: post #5
melling wrote: post #2

Will this be a replay of Soros "Breaking the Bank of England"? http://dealbook.nytimes.com/2010/06/04/when-soros-decided-to...

China's already warned Soros just a few days ago not to short the renminbi. http://www.ft.com/cms/s/0/ebabbebe-c40d-11e5-993a-d18bf68267... Edit - didn't see that the original WSJ article includes quotes by Soros mentioning his short, and also mentioned China's general warnings against shorts. Though the FT article I linked focuses specifically on Soros, and talks a bit about his history too.

> China's already warned Soros just a few days ago not to short the renminbi.

Perhaps it makes more sense to Chinese eyes, but that looks very odd to me. If Soros tries and fails, he'll lose a lot of money, but that would seem to be no concern of the Chinese government. So if the Chinese authorities had no worries about the outcome it seems like they'd have no reason to try and warn him off; since they are trying to warn him off, it suggests they're worried.

The entire thing sort of comes off as an admission of weakness to me, which I doubt was the intention.

Re: Currency War: U.S. Hedge Funds Mount New Attacks on China's Yuan

#26

Post by nl »

memracom wrote: post #23
GreaterFool wrote: post #6

Isn't everyone and their dog trying to devalue their currency these days to boost exports? What's the problem with weak yuan? Sure, iPhones will get even more expensive to buy in China (rather funny since they are made there) but other than that it should be a boon to exports, no?

Seems to me that the real driver of currency devaluation is the price of oil. By devaluing you protect your economy from big shocks because the price of oil stays unchanged, in the local currency. Russia did the same and has managed to maintain an economic boom in manufacturing, new industry, and hight tech military hardware. You can't pay attention only to numbers. You have to factor in culture, and a culture of har…

By devaluing you protect your economy from big shocks because the price of oil stays unchanged, in the local currency. Russia did the same and has managed to maintain an economic boom in manufacturing, new industry, and hight tech military hardware.

That doesn't make sense. The oil price is denominated in US dollars, so by devaluing you push it up. It's true that the price of oil is dropping too, but in the case of China they don't have domestic reserves so that doesn't matter.

IN the case of Russia they are in a pretty severe recession: http://www.reuters.com/article/us-russia-economy-idUSKBN0U70...

Re: Currency War: U.S. Hedge Funds Mount New Attacks on China's Yuan

#27

Post by Lazare »

MCRed wrote: post #16

I don't subscribe to the WSJ so I can't read the OP, but I thought the Yuan was wanting to rise, and that china was slowly letting it revalue. I thought all the economic pressure was aligned that way. Chinese have currency controls so they can't easily sell the yuan to buy other currencies (bitcoin is down for the past couple weeks- the one currency which chinese people love and which doesn't have any controls).

In the past, yes. China accumulated large reserves in an effort to keep the renminbi weak (in order to boost exports), but now they've begun spending them again in an effort to strengthen it.

Re: Currency War: U.S. Hedge Funds Mount New Attacks on China's Yuan

#28

Post by EGreg »

ctrl_freak wrote: post #21
GreaterFool wrote: post #6

Isn't everyone and their dog trying to devalue their currency these days to boost exports? What's the problem with weak yuan? Sure, iPhones will get even more expensive to buy in China (rather funny since they are made there) but other than that it should be a boon to exports, no?

All other things being equal, a weak currency is a good thing for a country. Unfortunately for China, a weak currency comes with a host of other problems, one of the most significant is capital outflow: http://www.bloomberg.com/news/articles/2015-09-25/china-capi...

Good thing according to what goal? I think countries have various trade imbalances and rectifying them is good for the country. At the end if the day, though, robots will do most of the work.

Re: Currency War: U.S. Hedge Funds Mount New Attacks on China's Yuan

#30

Post by sharetea »

Analemma_ wrote: post #4
melling wrote: post #2

Will this be a replay of Soros "Breaking the Bank of England"? http://dealbook.nytimes.com/2010/06/04/when-soros-decided-to...

They're trying to do the same time thing as Soros did, yes. But even after its recent $300 billion spending spree to defend the yuan, China still has trillions in foreign currency reserves left, orders of magnitude more than the BoE ever did. And they have a cultural imperative against "giving in" to Western capitalist pigs. I really don't think these guys have thought their plan through.

Not enough reserve

"by 2018 all of China's excess reserves — cash that it has on hand to use immediately — could be gone."

http://www.businessinsider.com/chinas-fx-reserves-less-than-...

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