Interesting rumour from ForexLive that China is intervening in the forex market to prop up the euro
Traders report talk that it is China buying dips in the 1.2540/50 level. Makes sense. If they are protecting 1.2500 they may want to give themselves a bit of breathing room. We bounced from 1.2552 lows on the latest pullback.
Why would they be doing this? Simple. The eurozone is China’s biggest export market. The collapse of the euro is margin-shredding for Chinese exports.
In other words, while the whole world is demanding a revaluation (upward), China is in devaluation mode, strengthening the euro, weakening the yuan.
This chart — via Waverly Advisors — confirms the supremacy of Europe as a Chinese export market.
Photo: Waverly Advisors
For what it’s worth, this has long been the prediction of SocGen’s uber-bear Albert Edwards. That a Chinese devaluation is coming this year.
Bear in mind this is minor. Central banks are always playing at the margins of the Forex market. But you can see clearly the direction in which China is feeling the heat.