The offshore yuan surged over 1% against the US dollar on the last trading day of May. USD/CNH broke below the key support level of 6.78 and fell further, to the 6.772 area, its lowest level since 17 October.
This unusual currency movement was owed to short-recovering activities, a practice involving short sellers starting to unwind their positions due to a surge in CNH’s borrowing costs in Hong Kong. The overnight yuan interbank rate in Hong Kong jumped to 21% per annum on Wednesday, making it expensive for short sellers to hold their positions, resulting in a ‘short squeeze’.
It was widely believed that policymakers’ interventions were behind this drama, as they wanted to prove the government’s ability to stabilise the offshore currency market, and slam the assumption of one-way depreciation of its currency after Moody’s downgrade.
Though some mainland media called it ‘a victorious defence against renminbi shorting’, government intervention marks another set-back of the offshore market’s liberalisation, hammering foreign investors’ interest in the offshore yuan.
Because you have no idea what the government’s next move will be.
Trump expects to withdraw from Paris climate accord
President Trump plans to withdraw the US from the Paris climate accord, an agreement with nearly 200 nations agreeing to voluntarily reduce greenhouse gas emissions to help fight climate change. His official announcement is expected in the next few days.
This is not a surprise at all, as President Trump has put the economy and job growth on top of his presidential agenda since his election campaign, and he had previously hinted that too much regulation and climate commitment were hurdles for the energy sector. US equities rebounded from earlier losses after this announcement.
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