People's Bank of China

Having made its warning to the Fed loud and clear ("if you hike or otherwise push the USD any higher, we will crush your markets by devaluing the Yuan against everyone but mostly the USD"), the PBOC continued the fragile ceasefire between the world's two most powerful central banks, when moments ago it kept the onshore Yuan virtually unchanged, by weakening today's fixing by 0.03% to 6.5637. However, as can be seen on the chart below, this has barely even registered.

Submitted by Jeffrey Snider via Alhambra Investment Partners,

Having apparently taken the day off from selling US Treasuries and buying Offshore Yuan (following yesterday's "murderous" short-squeeze"), completing a 40 handle round trip in the "stable" currency year-to-date, PBOC decided to hold Yuan flat for the 4th day but make a statement that they would "give policy support to exports" - in other words devalue more.

With Chinese equities tumbling in the face of PBOC's liquidity withdrawal (record spike in o/n HIBOR) and short-squeeze of CNH shorts (and carry traders), the sell-side is as confused as a CNBC anhcor at what is good and what is bad. UBS urges investors not to sell while JPM fears a structured-product-driven vicious cycle between EM and Chinese equities. Following a record-breaking surge in offshore Yuan against the USD (12 handles top to bottom) during the US session, selling has resumed into the fix.

Yuantervention overnight steadied the Chinese currency and despite a plunge in Asian equities, stabilized US equities thanks to an incvessant bid for USDJPY. However, this morning has seen PBOC's Ma crawl out from under the desk to attempt to calm investor panic with two-faced comments about the nation's new FX regime. Noting that PBOC will focus on stability of Yuan vs their new CFETS basket, Ma then back-handedly said two-way volatility was expected to increase (in a clear nod to stopping carry traders piling on).