PBOC-Yuan just a latecomer to the devaluation game

PBOC latest entrant to competitive devaluation

There was a big hooha following PBOC’s move to devalue the Yuan last week. I wonder why because here is a chart I got from Investing.com that says different from the narrative I read on mainstream media.

What I did was to load a chart of USDCNY and then apply overlays of USDJPY, USDMYR, USDSGD, USDAUD and USDNZD. My focus was Asian of course but the results were amazing. It shows me that PBOC was not alone in the devaluation game but in fact a latecomer. See the scale on the right? It shows how much each currency pair gained or lost from the starting point on the time-axis. This is how I read the chart:

  1. Every currency pair was strengthening against the USD after a spike in 2009. 
  2. They continued to strengthen until 2012.
  3. CNY was holding steady mostly after 2013 as other currencies weakened against the USD.
  4. CNY continued this stability against USD a little bit further until 2014.
  5. Some point after mid-2014, CNY was losing to everyone else that weakened against USD. This left CNY as the most expensive currency.
  6. If there is a major economic power guilty of unrestrained devaluation, that honour must belong to Japan; not coincidentally after Shinzo Abe was elected Japanese PM late 2012.

Overlay of USDMYR, USDSGD, USDJPY, USDAUD, USDNZD on top of USDCNY (area chart below)

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