12 reasons why China is devaluing RMB

Overvalued against major trading partners

Once China published CFETS RMB Index, it becomes clear why they have to devalue Renminbi. 12 currencies named in the index have been devaluing since 2011.

CFETS RMB Index constituents

CFETS RMB Index constituents | Source: Bloomberg

 

12 of them have been devaluing against the RMB since 2011. We know also that this index was conceived as early as November 2014 which means policy makers have been simmering for a year.

USDCNY overlaid with currency pairs of 12 major trading partners

USDCNY overlaid with currency pairs of 12 major trading partners

This reinforces the observation that China is merely a latecomer to the currency devaluation game and explains why they chose to do it in a big way.

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Soh Tiong Hum is Director of TerraSeeds Market Technician Pte Ltd. TerraSeeds is a trading educator in Singapore since 2005. Soh Tiong Hum is a member and regular speaker at Technical Analysts Society Singapore events and has a bi-monthly lunch time event at IG Singapore on forex and stock markets. He is an avid blogger on technical analysis topics; his Twitter account @sohtionghum was ranked #23 out of The Top 70 Twitter Accounts To Follow In 2015 by MahiFX. Come find Tiong Hum on Google+
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