China Reopens With Another Dollar Warning

The RRR cut signals that the reserve problem therefore dollar problem is anticipated to grow worse. The PBOC is actually telling us that they expect in the months ahead the same or perhaps bigger commitment to “stepped up support.” CNY doesn’t need support if there is no worsening “capital outflow” situation of retreating eurodollar funding.

This will require more monetary contraction in bank reserves than we’ve already seen. The central bank is forecasting more problems ahead.

 

 

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