The market’s rally today emanated from a view that the Chinese support of its own yuan was a sign of a softening and more conciliatory attitude toward the trade war with the U.S….That’s Baloney! This was simply a defensive move to protect against the winds of devaluation buffeting the Chinese currency in the open market.
A weak yuan hurts the Chinese as their standard of living falls along with the currency. Moreover, the cost of servicing billions of dollar denominated debt skyrockets.
China must use foreign reserves to support the yuan. She is between a rock and hard place having to choose between depleting reserves or suffering the consequences of a falling currency. But conciliatory??…No Way!