Following the collapse of offshore Yuan to 5 year lows and decompression to record spreads to onshore Yuan, The PBOC has stepped in and dramatically devalued the Yuan fix by 0.5% to 6.5646. This is the biggest devaluation since the August collapse. Offshore Yuan has erased what modest bounce gains it achieved intraday and is heading significantly lower once again. Dow futures are down 100 points on the news.
PBOC fixes Yuan at its weakest since March 2011... with the biggest devaluation since August
And Offshore Yuan collapses...
This all has a worrisome sense of deja vu all over again... We have seen this pattern of money flow chaos before... Outflows surge from China, send liquidity needs spiking, which bleeds over into Saudi stress (petrodollar?), causing unwinds in major equity markets (thanks to deleveraging of carry trades) in China and then US stocks...
Hold your breath. Dow futures plunged 100 points on the news...