Devaluing the renminbi

人民币汇率：牛皮市来了. China's banks dump dollars to halt renminbi slide. Below is Google translation of relevant portions:

"But if the debt crisis can not get a breakthrough and progress slow, and even the disintegration of the euro area, it is not impossible, to continue strong U.S. dollar, the depreciation of the expected short-term effect on the market, the market is once again acting on the expected, if this into a vicious cycle , leading to devaluation of the RMB is really into the channel on the true 'Xiecai' a ', a domestic financial institutions, traders said.

Depreciation is expected, once formed, will lead to capital flight, devaluation is expected to result in more more capital outflows, resulting in the already depressed domestic A-share market and real estate market further downturn, leading to bad did not increase the risk of a hard landing for China's economy , combined with the complex financial environment, foreign and further dollar strength, lack of confidence in China's economic situation could lead to further depreciation of the RMB, and the previous depreciation on exports can bring good, but also because of poor external demand can not be played due to the effect of stimulating economic growth.

This is a sound picture of terror on the people feel, those in the A-share investment institutions have also fear in the heart.

A weak yuan is bad news for asset prices in China and the big news is that many people now expect some devaluing, with forwards pricing in a small depreciation of just over 1%. That's a small figure, but markets are non-linear. When a market tips from a heavy sentiment in one direction, the initial move will be small, but it will rapidly accelerate and then overshoot. What's behind the falling renminbi? 美元荒. Dollar Shortage!

If you are the Greeks, how would you handle your money? If you are a European business owners, how would you handle your cash assets? Investors in other countries, especially U.S. investors, including hedge funds how to handle their own money? European financial institutions to help themselves, to obtain liquidity, will be how to deal with investment in emerging markets?
All answers to these questions are: U.S. dollars in cash. Market dealers, there is an interesting statement, "If the disintegration of the euro area, 2012 has truly arrived, and that Noah's Ark and only dollars."

There's a debate over whether China should continue with currency reform during this volatile period, especially when China's horde of U.S. dollars and desire to maintain the currency value is providing a source of U.S. dollars to the world. See Year End "Dump" Renminbi Event 年终“抛售”人民币事件

"I want to buy dollars."

"I want to buy foreign exchange! Buy U.S. dollars! First settlement had not!" Voice full of similar counters at designated foreign exchange banks around. Some companies eager to import or purchase of foreign exchange abroad residents are worried that devaluation, want to purchase foreign exchange in order to advance preservation; some exporters in the country bought in advance to the Hong Kong dollar settlement, because the offshore market of RMB cheaper, can be from arbitrage.

2012 will be interesting, not because of fluctuations in the renminbi, but the United States' political and economic response to a stable or even depreciation renminbi. Socionomics says the result will not be harmonious.