“Colossal Defeat” For Obama As Australia Joins China’s Regional Bank

Having attacked its “closest ally” UK for “constant accomodation” with China, we suspect President Obama will be greatly displeased at yet another close-ally's decision to partner up with the Chinese-led Asian Infrastructure Investment Bank (AIIB). As The Australian reports, “make no mistake,” the decision by Australia's Abbott government to sign on for negotiations to join China’s regional bank, foreshadowed by Tony Abbott at the weekend,

China Options Limited As Repo Rate Hits Record

We’ve said on a number of occasions lately that China is currently stuck between a rock and a hard place and may have no choice but to join the global QE party (perhaps by purchasing local government debt). On a REER basis, the yuan is the second most overvalued currency in the world and as Soc Gen recently noted, that’s hurting the Chinese economy at a time when it can ill afford further headwinds. Unfortunately, devaluation could risk exacerbating capital outflows at a time when data on FX deposits for corporates suggests nervousness abounds about the near-term outlook for the yuan. We summed up the situation as follows: devalue too much, and the capital outflows will accelerate, not devalue enough, and the mercantilist economy gets it.