‘The escalation of the unwind in recent days suggests the vicious circle is beginning’ observed an article sent to me by a valued source yesterday. All I can do in the light of this information is ask how we will know when the circle has ended – or whether it has, at one and the same time, completely unravelled due to its wilful decision to jump on the escalator.
Earlier, the column had told me that ‘we estimate for every 0.1 move in USD/CNH above the average EKI (which we have assumed here is 6.20), corporates will lose US$200 million a month. The real pain comes if USD/CNH stays above this level, as these losses will accrue every month until the contract expires. Given contracts are 24 months in tenor, this implies around US$4.8 billion in total losses for every 0.1 above the average EKI.’
Hmm. Don’t miss the 6.20 whatever you do, as the tenor is only 24 months long, lucky boy. I’m more of a sopranos man myself, but either way frittering away 4.8 billion bucks for every 0.1 above the EKI does sound a tad wasteful. If only I knew what the EKI is.
‘The size of the circles is the notinal being hedged’ concludes the author, and he may well be right. What it all means is that the Chinese currency is going to collapse and then we will get deflation.
The angle of dangle is equal to twice the tempo of the throb of the knob when all other variables are constant. Fire on the back of a blue giraffe, shepherd’s warning. If you go for a pee, there’ll be brimstone by three.
I reckon that about covers it.