Over night, China devalued the Yuan once again bringing it to a new low this year and within a stone’s throw of the 2009 peg level.
So far I’ve been a bit confused by the market’s sanguine response to the weakening Yuan. This goes back to a much bigger problem I’ve seen in markets lately, a growing number of disconnects. The Euro is another excellent example. With BREXIT, the European banking crisis, rise of populism, the migrant crisis, and many more problems facing the single market it is truly amazing to see the currency have a bid at all. Given massive central bank intervention it shouldn’t be surprising that the market has ceased to properly function. The most obvious result will be a heavy increase in unforeseen dislocations.
Now, it’s impossible to know when the market will start to care about the Yuan, but something tells me that the 09 peg level is going to be quite important. For now, I’m comfortable playing the role of Sam Rockwell’s character, Crewman #6.