USD/CNY → China stocks

Common explanation (Ripple · renminbi weakens, China stocks fall): Sharp swings in Chinese stocks can fuel capital outflows, and outflows put pressure on the renminbi (the source discusses 2015⁠–⁠16).

This issue: USD/CNY at 31 (cool), China stocks at 68 (warm) — USD/CNY below normal, China stocks above normal, in line with the common explanation (this is an inverse link).

Hot and cold describe position, not good or bad: warm does not mean a fall is coming, and an extreme reading does not mean a quick reversal. We describe history only, with no buy or sell advice.

Where it stands now

Where the two indicators stand this issue

USD/CNY: 2.4% below its 10-year average. China stocks: 19.9% above its 10-year average.

Tests

Does this link hold up?

Common explanationSharp swings in Chinese stocks can fuel capital outflows, and outflows put pressure on the renminbi (the source discusses 2015⁠–⁠16)Source: Eswar Prasad, Finance & Development (IMF), “A Middle Ground” (2017). In the source, the stock slump comes first and pressure on the renminbi follows; this site tests whether the two move at the same time.
Tested against our dataAgreement between the positions of USD/CNY and China stocks (same month), measured in the direction of the common explanation: +0.78 (an opposite-direction link: the raw correlation is −0.78, and a negative correlation fits, so the sign is flipped). Looking at every 5-year period (shifted one year at a time), the two moved in that direction in all 3, but that does not mean they always will; data start only in 2018. Supported by the data
Periods when it did not holdAcross 3 5-year periods, out of step in none.

History

The two lines, overlaid

Data: Federal Reserve H.10, via FRED (Federal Reserve Bank of St. Louis); OECD Main Economic Indicators (share prices). Positions: our calculation.

USD/CNYChina stocks

Time lag

At what lag do they match best?

Longer bar = moves more in the direction of the common explanation (the number is the agreement).

same month+0.78
3-month lag+0.61
6-month lag+0.30
9-month lag+0.02
12-month lag−0.08
18-month lag−0.37

Limits

What this card cannot tell you

Moving together does not prove that one causes the other.
Links change over time; periods when this one did not hold are listed in full.
This is the historical record, not a forecast.

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