China

Once again, China was faced with the unpleasant task of deciding which asset class to intervene in: its plunging stock market, or its currency. It chose the latter, and as a result after a turbulent start the Shanghai Composite sank by 5.3% to close just above 3000 and down 15% in just the past 11 days, suggesting that the PBOC is increasingly seeing the CNY1.8 trillion (at least) spent to stabilize stocks as a sunk cost.

China have suspended their banks from the Foreign Exchange markets and ordered them to stop buying U.S. Dollars.  China’s foreign exchange regulator has ordered bank’s to limit the purchases of U.S. dollars for at least one month in an attempt to stem capital outflows. Superstation95.com reports: The move comes as China reported its biggest annual drop in foreign exchange reserves on record in 2015, while the central bank has allowed a sharp slide in the Yuan currency to multi-year lows, raising fears of more capital flight.

Submitted by John Rubino via DollarCollapse.com,

As China’s leaders figure out that pegging the yuan to the dollar while quintupling their debt in five years was a colossal mistake, they are, apparently, concluding that the only way out is a sudden, sharp currency devaluation. As Reuters reports...

On Thursday, as the world was focusing on the collapsing Chinese exchange rate, we noted that in a more troubling development, in December Chinese FX reserves declined by a record $108 billion, bringing the total drop for 2015 to over half a trillion, and the cumulative decline since Chinese reserves starting dropping in mid-2014 to just shy of $1 trillion.

Excerpted from Doug Noland's Credit Bubble Bulletin,