MBS RECAP: Why Do We Care About Chinese Currency?


Posted To: MBS Commentary

From 2010 on, the point about the interconnectedness of global financial markets has increasingly been driven home. It was a fun time for me, analytically, because I felt like those of us who understood the gravity of the European situation had an unfair advantage when it came to understanding what was moving markets. Traders are totally hip to those vibes these days and that's the first reason that rates would care about something like a foreign currency. In this case, however, it's not the currency valuation itself that carries implications for the bond market. Rather, it was the symbolic nature of the move (i.e. China decided to weaken its currency to levels not seen in more than a decade) that caught the market's attention. Bottom line, it's China's way of doubling down…(read more)

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