While many people were looking to the sell-off in the Turkish Lira and the South African Rand, the turn around on a development with the funding market in China may turn out to be the real story. In short, the cost to short the Yuan jumped to the highest level since 2016 and early 2017.
With China increasing the cost to borrow the Yuan, a key vehicle to short the currency while restricting Chinese bank’s ability to lend yuan off-shore, traders may be wondering if we’ll see a seven-handle on the USD/CNH anytime in the near future or later. Especially with US Dollar long positions by institutions already stretched.
Adding to the narrative, unsurprisingly on Monday was US President Donald Trump, who had a few words of disappointment for Fed Chairman Jerome Powell ahead of his keynote speech at Jackson Hole on Friday. The following headlines hit my terminal, which aligned with downside pressure on USD/CNH: