"A carry trade that involves borrowing yuan and investing in a basket of eight emerging-market currencies has returned 0.5% this quarter even as the yen-funded alternative has tumbled around 7%, data compiled by Bloomberg show."
"It still makes sense to short the yuan against a basket of emerging-market currencies as it would be contradictory to allow the currency to strengthen when the central bank is trying to ease policy," said Alvin T. Tan, head of Asian currency strategy at Royal Bank of Canada in Singapore.
"China's economy is struggling, and the PBOC is widely expected, and has indeed signaled, that it will ease policy further in coming months," he said.
"The collapse of the yen carry trade following the BOJ's July 31 decision did at least initially spill over to the yuan. The yen surged 6.8% during the week through Aug. 5, while the yuan jumped 1.7%."
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