In China’s current deflationary context, a standard devaluation would be self-defeating, as it would raise the debt-burden on private agents with hard-currency liabilities more than competitiveness. As a result, the weakening trend of the yuan to the dollar in recent months is far from assured to continue, if only because accommodating it would require to widen the yuan-dollar fluctuation band a second time, after this was already done in mid-2014. In this respect, the recent interventions of the PBoC in the foreign-exchange market were meant to take the parity back to midrange.
Strategy and Economic Research at Amundi
Bond sell-offs are often associated with a radical change in expectations. In May 2013, the fact that Ben Bernanke was, for the first time, talking about the possibility of a reduction of the Fed's asset purchases (QE3 tapering) had given rise to the idea that the fed funds policy was going to be tightened very quickly.
Fixed Income and FX Strategy