Oh, can’t we have renminbi revaluation before the weekend, China? Please?
Reuters reports that forwards on the RMB deflated a bit on Friday. Seems traders found a Thursday NYT piece, which declared a rise “very close” and imminent in the “coming days”, too good to be true.
For Friday’s trading, at any rate.
Tim Geithner’s trip to Beijing on Thursday did indeed fail to get the goods — and even the oracle of Lex is staying vague. Nevertheless, Geoffrey Yu of UBS has decided to attach some specific — and rather sharpish — dates to Chinese policy.
Brave man. As he told FT Alphaville:
Beijing and Washington are aiming for a “reboot” right now and giving the US a reval would be the best way to do that before the leaders meet on Monday/Tuesday.
In which case, Friday or Monday, perhaps — Yu believes a weekend revaluation would be harder to pull off. And this is his scenario for how appreciation would most likely be carried out, based on the last such move in July 2005:
If yuan revaluation follows the blueprint of 2005, the announcement will be made at 1100 GMT [1200 BST, or 0700 EST], with a new designated level and a new trading band – this last being less important because the current trading band has not been fully utilized. The Times says the yuan would experience a ‘small but immediate jump in its value against the dollar’, which would be consistent with the 2005 precedent of a 2% overnight move, or less.
In the immediate aftermath of a yuan revaluation we would look for market participants to buy yen and other Asian currencies against the rest of the G10, and to buy commodity currencies. Note however that in 2005 the yen gave back its gains very quickly; barring a risk aversion event or stop-loss buying of yen, we would expect the same to happen this time.
Hmm. FT Alphaville has noted the precedent set by 2005 before: the People’s Bank of China has often described the renminbi as ‘basically stable’ in a way that matches how the phrase was used to camouflage 2005′s rise.
Let’s see if history manages to repeat itself before the weekend.
Related links:
Renminbi revaluation: it’s a world war out there - FT Alphaville
China as currency manipulator: reality check, please - FT Alphaville
Devaluing the yuan – FT Alphaville