The Central Bank Has Been Tasked With Taming The Short Sellers. This Is The Activist.

If a central bank that hates speculators plan to celebrate victory, the following may not be the most ruthless: allowing local currency to be freely borrowed in offshore markets and pushing the exchange rate to the highest level this year.

In fact, this is exactly what happened last week in the renminbi, no matter what the Central Bank of China (PBoC) intends to do.

At the beginning of last quarter, hedge funds and other institutions made a big bet on the decline of the renminbi. On the last day of last quarter, the overnight interest rate of offshore renminbi in Hongkong became negative (for the first time ever recorded), and the offshore renminbi against the US dollar was set at its highest level since mid December.

At the most dramatic stage of the renminbi market in early January, the sharp fall in the offshore renminbi exchange rate made sure that the Chinese were convinced that they were right.

Since then, investors have been facing the dreadful rival of the Central Bank of China.

The Central Bank of China intervened in onshore and offshore RMB markets, issued new requirements for bank deposit reserves and used a large amount of foreign exchange reserves.

As a result, investors are deeply introspection and lowered their positions.

The problem now facing us, especially the hedge fund that lick wounds, is to see whether China's economy will lead to a significant depreciation of the renminbi, and whether it will win in the coming months.

"Many people still believe that

We will be forced to adjust downwards - we think so - but the question now is how the renminbi will be adjusted downward, "said HSBC HSBC's foreign exchange research director.

(Paul Mackel) said, "the depreciation of the renminbi may not be as intense as people thought before."

One reason is that the thorny offshore market, where international investors express their views, has been tamed.

Intervention and the new offshore renminbi reserve requirement tightened liquidity.

"Since August 2015, when China implemented a one-time devaluation of the renminbi, the offshore market has been a huge challenge to the efforts of the Central Bank of China to stabilize the renminbi," said Yu Xiangrong, a strategist at CICC. "In particular, the huge spread between onshore and offshore exchange rates led to large-scale cross-border arbitrage activities, which worsened market expectations on the occasion of the devaluation of the renminbi."

Strategist said that the reason why the overnight interbank lending rate in Hongkong was negative last week is probably due to the deposit reserve requirement.

In January this year, the people's Bank of China issued the first deposit reserve requirement for offshore renminbi deposits, which was assessed quarterly by commercial banks. This means that theoretically, banks had the motivation to reduce deposits last Thursday, even if it meant paying the money to the funds.

As a result, the offshore renminbi market has become more like that.

Now.

"The renminbi is under control and will continue to be controlled.

This is not a free market; the Central Bank of China is the biggest player, and we all know that, "said a senior banker from an inland China agency.

He predicted that there will be no more dramatic changes this year.

The Fed may also help empty Renminbi holders.

Despite dovish remarks by Janet Yellen, chairman of the Federal Reserve in the past week, to help push the yuan exchange rate higher with the US dollar falling, analysts warn the market not to view these markets as a new trend. Janet Yellen

"You still have to believe that the Federal Reserve will raise interest rates at a certain point, while the Central Bank of China will relax monetary policy.

This is a story about the currencies of the two countries, not just a Chinese country, "Mickael said.

According to a survey by Reuters (Reuters) on the no cash delivery forward (NDF) position, which is a way to see empty bets, investors are still short selling the renminbi, but those positions are less than 1/4 of the peak in January.

This is in line with the statement issued by the banking sector and hedge fund brokers.

A strategy of increasing attractiveness is to place more emphasis on the renminbi against the US dollar and other currencies.

Measured by China's central bank's own basket of currencies, the yuan depreciated by 1.6% in a month.