Having been well-managed all week, amid various headlines (and extreme hopium in US equities), something just snapped in the Chinese yuan...

As we just detailed, from Deutsche Bank, who worry that USD/CNY will break through 7...

Asia is the region we expect to suffer most from the renewed global headwinds. We argue that policymakers in China are now going to be more accepting of USD/CNY appreciation through 7: years of regulatory measures should make outflows more manageable, easier monetary policy will add upside pressure and a weakening FX is the natural means of offsetting tariffs.

Moves so far in USD/CNY have been proportional to the weighted average tariff being borne by Chinese exporters with the measures currently imposed already consistent with USD/CNY at 7.10. Our preferred trade expression is short CNH/JPY with the yen primed to benefit from global risk aversion and resumed signs of Japanese equity repatriation in recent weeks.

Big picture CNH/JPY remains one of the most expensive currency crosses in the world.