With all the news of China’s foreign reserves falling and possibility hitting a “minsky moment”, what are some trade ideas, in the personal account, for a devaluation?
https://www.ft.com/content/f5243188-bc55-11e6-8b45-b8b81dd5d080
Well, a lot of the devaluation is priced into the forward curve already. Plus, any real short RMB cash position will have you paying interest of 5% or whatever it is. With the bid/ask spread for retail investors to enter such a position, I do not know if it is worthwhile from a risk adjusted perspective. I doubt that there will be any huge move in currency - probably just a gradual depreciation like over the past year.
Anyway, if you do choose to pursue such a strategy, probably the most cost efficient way to go is to short FXI, or another relatively liquid product with high correlation with CNY, especially for negative shocks, and maybe pair it with long UUP, SPX, or something like that.
Good analysis ohai!
Wouldn’t a Minsky Moment imply a sudden revaluation or dramatic change. It’s possible that a Minsky Moment won’t happen, but if the bet is that it will, it would seem that you’d want a tool that reacts quickly rather than watch CNY slowly collapse like a flan in a cupboard.
never heard that before
Does flan collapse? I thought it is like a custard thing. Does he mean souffle?
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This is a couple years too late though, I looked at ways to hedge back in 2015 (as I’m long), but there’s not really anything, and as mentioned it’s all priced in now anyhow.
Sigh. It’s really weird seeing this time stamped from the day of the event.
You’re short Yuan via long USD.
Do nothing and “profit”.
it was dec 29th not 28th
Short term solution for a long-term problem.
Let’er float!