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The Chinese currency (the yuan) is plunging fast…
Bloomberg reports the yuan is less than 0.1% away from its January low. That was the weakest the currency had been since 2011… and it’s still dropping.
The decline will spur additional, massive capital outflows… as Chinese citizens and businesses try to avoid another substantial drop in the value of their cash in the bank.
In March, “only” $44 billion in capital flowed out of China. That’s down from $144 billion in January. As the yuan breaks out to fresh lows, expect several hundred billion more per month to flee again…
Longtime Daily readers know China’s gigantic fiscal imbalances (and subsequent debt explosion) drive the move to devalue. That means China’s currency moves present a huge short opportunity for us…
Here’s what Tom told Palm Beach Letter readers last December:
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Eventually, China will be forced to further devalue its currency in an effort to make up the cash flow it once had. It has cut interest rates six times in the past year. And its biggest devaluation came this past August. It let its currency free float, which immediately sank 3% versus the dollar. Let me be clear, the Chinese government isn’t going to go bankrupt. And China isn’t going bankrupt. With a country as vast and full of natural resources as China, there will be pockets of growth and opportunity. But on the broad scale, in the coming months and years, we will see so many debts go bad and default, throughout both the private and quasi-government sectors. It might feel like the whole country is going bankrupt. The dollar will continue in its bull market. And China’s $1-3 trillion in U.S.-denominated debt will rack up devastating losses. |
Bottom line: China’s devaluations are still in their early stages. Expect the dollar to continue its rise against the yuan. All Palm Beach Letter subscribers can click here to review Tom’s favorite way to profit from China’s currency devaluation.
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