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EM Watch: Western investors are tired of China and Japan “crying wolf”

The JPY is once again suffering from a weak CNY, and the metals trade is not performing despite FX debasement risks in Asia. Have markets gotten tired of the co-ordinated “cry wolf” rhetoric from Asian monetary authorities?
2024-06-26

Welcome to our weekly EM Watch, with a particular focus on China and metals.

I used to travel to China and Japan a lot, but I haven’t visited the region as often lately (I have two small kids to blame). Allow me to reflect on how the Chinese and Japanese investment cases look from the outside and how Western investors perceive the current rhetoric around the suffering local currencies in the region.

The CNY once again “slow burns” versus the USD this week and we are approaching the 7.30 handle, which has typically been the line in the sand for the PBoC in China. As the JPY weakens towards renewed highs in USDJPY, Western investors have once again turned their attention to Asian FX and markets and the rhetoric of local authorities.

The overwhelming sentiment is that Western market participants are tired of the perceived “cry wolf” approach from both the Chinese- and Japanese authorities. Either we get some ACTION backing up the words, or else it may end in tears.

Chart 1: Is the true fair value of USDCNY as high as 8.00?

The JPY is once again suffering from a weak CNY, and the metals trade is not performing despite FX debasement risks in Asia. Have markets gotten tired of the co-ordinated “cry wolf” rhetoric from Asian monetary authorities?

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