Bear Take: Reserve and Currency Rebound Weak
using a separate gauge compiled by China’s SAFE which tracks onshore FX settlement as well as cross-border RMB flows, shows something vastly different: as calculated by Goldman, China has not had a single month of FX inflows since its mid-2015 Yuan devaluation
The U.S. Dollar fell 10 percent from its recent high in December 2016, it fell for 5 consecutive months into July. Chinese FX reserves have rebounded 3 percent from the January low, CNYUSD rebounded 3 percent from its December 2016 low. The yuan exhibits very mild strength amid a very weak period for the U.S. dollar. If I am correct and the U.S. Dollar Index still has a new high ahead of it, the past seven months of yuan appreciation and reserve growth will offset one month of losses during the next bear move.