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Analysts at TD Securities point out that they have been bearish the CNY on the back of economic dynamics and a divergence with more aggressive Fed monetary policy.

Key Quotes

“With sharp CNY depreciation vs. the USD and on a CFETS basis, policymakers appear to have abandoned the strong CNY stance, but have also looked to calm concerns that this is anything more than a fundamental adjustment.”

“This risks re-igniting Chinese capital flight pressure, but also regional volatility as the renminbi has acted as an anchor.”

“CNY depreciation has helped to drag down asset markets across Asia in a move reminiscent of Aug 2015 and Jan 2016.”