Ian Reynolds
China Currency Interventions
China was selling USD for Yuan (onshore) via commercial banks aggressively this week as the economy's weakness / investor flight drove the currency to the worst rate for a year.
The PBoC daily rate fix was twice this week 1,000bps away from the market showing that the central bank is beginning to lose control.
China’s central bank steps up intervention after yuan hits 16-year low against greenback [CNBC]
The real estate mess is getting worse. Although the specific event for Evergrande (link below) is part of an orderly restructuring program
Evergrande files for US bankruptcy protection as China economic fears mount [Reuters]
China’s property crisis deepens with developer Country Garden at risk of default [Guardian]
Chinese real estate accounts for 75% of total household wealth and 30% of GDP.
Although the Government 3 red lines policy seems like a good idea, it does seem to be clarifying just how bad things really are.
"Since then, companies responsible for about 40% of Chinese home sales have defaulted. Country Garden, which missed two dollar bond payments last week, has until early September, when the grace period on those payments expires, to quell fears that it is about to tumble into the same fate."
China threatens to follow Japan’s path of meteoric rise and stagnation [AFR]
USD Wrecking Ball & De-dollarisation
USD bounce has caused a lot of markets to sell off: Gold, Silver, Oil, Stock, Bitcoin to name a few.
The BRICs conference is due on the 22nd August with a rumoured 61 countries wanting to join, that's a large increase in a year or so.
No matter the economic force of those countries, they will all have eurodollar debt needing interest payments in USD and if the countries want to swap them into their local or other currencies they only way they can do that is to buy USD. Keep the debt or swap the debt the result is the same: buy USD
Many of the traditional market participants are confusing dedollarisation with reserve status of USD.
In Case You Missed It
UK
Largely missed by the international financial press is the UK, where structural economic and political issues abound. Consumers seem to be voting with their wallets.
Australia
The AUD is unwanted. The economy is slowing, unemployment is beginning to rise, the Govt is in trouble with it's signature Voice referendum now likely to fail.
Inflation seems to have topped out for now, but is sticky at levels far too high for RBA. And the Chinese economy is tanking.
16pc haircut on Dexus Margaret St tower shows office pain [AFR]
This Week's Important Economic Indicators [London time]
