A true paradigm shift

Steen Jakobson, Chief Economist & CIO / Saxo Bank thinks the following, 1)China's devaluation of the yuan marks the end of "extend-and-pretend", 2)USD likely to weaken as the cost of capital rises over the course of the year 3)Beijing's plan is to support the economy until the new Silk Road comes online. “The move (so far at least) needs to be put in perspective: the CNY is 14% stronger than it was this time last year, the USD has risen against all currencies, and export volumes are down. Most importantly, China’s two main competitors – Korea and Japan – have devalued by 15% and 40% respectively over the last two years. Bloomberg estimates that a 10% devaluation in the currency will mean a 10% growth in exports. The negative here is the risk of capital flight, but again, Bloomberg estimates that for every 1% move in the CNY, $40 billion leaves – so $400 bn for a 10% devaluation." To read the full article and access more insightful charts click the (VIEW LINK)