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Strategies & Market Trends : Currencies and the Global Capital Markets

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To: Henry Volquardsen who wrote (2015)	8/6/1999 1:02:00 AM
From: Sam	Read Replies (1) of 3536

From Fleckenstein's Thursday Rap: From the 'left field' department... There continue to be concerns about a yuan devaluation, and I thought I would share with you some musings from Colin Negrych about what that might mean. If the yuan devaluation fears reach fever pitch, and result in an appreciable weakening of the yen, the U.S. bond market will become e-x-t-r-e-m-e-l-y well bid... to some extent from expectations of a significant strengthening of the dollar but moreover, from a significant increase in "safe haven" buying in an environment already rife with uncertainty. If bids appear, however, they will likely be filled in like pop tarts by Asian central banks and private investors, all of whom recognized a devaluation as occasion for a dollar "exit strategy" trade, and not the beginning of a rehabilitation of the dollar and U.S. asset markets. Some folks will undoubtedly assume the Fed will respond to yuan devaluation-related instability by n-o-t raising rates. These big brains are already bidding up the S&P."

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