China Macroeconomics & Academia

Christopher Balding

FX & Rates

<p>The reversal in the CNY requires some more in depth analysis to look not just at the forwards rule change and the CNY link to the USD, but to the larger flow of funds that is pushing the CNY.</p><p>Given the rapid rise of the CNY against a depreciating USD, what stands out is the low quality prediction of the forwards market.  As we can see in Figure 1, the forwards market except in very recent history, failed poorly at understanding the size and directionality of the market.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/033/622/original/Figure%201.jpg?1505437747" class="editor-image img-responsive" data-smartkarma-image-id="33622"></figure><div class="content-caption">Figure 1</div><p>Given the current…</p>

The reversal in the CNY requires some more in depth analysis to look not just at the forwards rule change and the CNY link to the USD, but to the larger flow of funds that is pushing the CNY.Given the rapid rise of the CNY against a depreciating USD, what stands out is the low quality prediction of the forwards market.  As we can see in Figure 1, the forwards market except in very recent history, failed poorly at understanding the size and directionality of the market.Figure 1Given the current…

CNY

Underlying RMB and Pricing Mismatches