Waiting for the X-Factor

Waiting for the X-Factor

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There's lots of news out there, boys and girls, but as always, it's what we don't know that is probably the most interesting. The China markets - bonds, WMPs, stocks... all seem to be going through another rough patch, but it's all so coddled that it's tough to figure out what it means. The banking regulator, Reuters reported, tried to get bankers to deny that it was giving instructions on forex transactions to try to limit capital outflow, which certainly wouldn't inspire confidence amongst the bankers. Bitcoin trading in recent months, it was revealed, has been 98% against the RMB. There were also reports that Those In Command are seriously considering giving up the battle to support the RMB, which has already significantly depleted the forex reserves. The argument is that a market-floated RMB would mean no need to waste the reserves in a no-win battle and would provide a strong counter-argument to critics in the US and elsewhere about the RMB being a controlled currency. But there's of course a down-side to such a strategy, which is that no one knows what the true market value of the RMB is, and where the well-known herd instinct of Chinese investors would take it. 7.5? 8.0? Beyond that historically conforming number of 8.3?   

We could mull on Trump-related possibilities, but indications aren't facts so we pass for this last week when the nuclear codes are still in the hands of Obama, beyond saying that it looks unlikely that 2017 will pass without some sort of X-Factor event taking place. Food for thought on the weekend. Enjoy!