Until recently, the increase in China’s economic weighting manifested on the currency markets primarily through the impact the country’s economy had on commodity prices. The trend in the renminbi itself had relatively little impact on the other currencies because the renminbi was extremely stable and closely pegged to the dollar. That said, recent monetary reforms changed the game in a big way.
Bastien DRUT, Roberta FORTES
The RMB (onshore) has depreciated by 1.6% vs. USD ytd. (-5.8% since August 10th, the day before the announcement of the RMB devaluation). It is however interesting to note that while the trade-weighted USD has continued to appreciate since August 10th (+4%), the trade-weighted RMB has depreciated (-2%).
Fixed Income and FX Strategy
The rise in bond yields since Trump’s election is not surprising, but it raises a crucial question: are we witnessing a radical reversal of the underlying trend that has been driving for decades (i.e. bonds yields decline), have we ended with abnormally low rates, or is it “simply” one of those many corrections that we regularly attend? Clearly, is it a regime shift, a change of level, or a correction within a fluctuation band? After analysing the usual and specific triggers for bond yields increases, five conclusions have to be pointed out:
Global Head of Research