We have been almost alone in our exclamations at the collapsing offshore Yuan in the last few days but since The IMF blessed China's currency with inclusion in The SDR, CNH is down 13 handles. However, now we appear to have an answer. Overnight saw commentary from CFETS (China's FX market 'manager') that indicated implicitly that Trade-Weighted Yuan was still trading too high.

In late China trading, The China Foreign Exchange Trade System (also known as CFETS) has published CFETS exchange rate index on its website on December 11th.

The CFETS, founded on April 18, 1994, is a sub-institution of the PBC. Its main functions include: providing systems for FX trading, RMB lending, bond trading, and exchange rate and interest rate derivatives trading; organizing FX trading, RMB lending, bond trading, and exchange rate and interest rate derivatives trading; providing clearing, information, risk management, and surveillance services on interbank markets; and engaging in other businesses authorized by the PBC.

In their words, this will help bring about a shift in how the public and the market observe RMB exchange rate movements.

Looking at international experiences, the Federal Reserve, the European Central Bank and the Bank of England all publish their own exchange rate indices, while intermediate institutions also publishes their indices. For example, the U.S. Dollar Index released by the Intercontinental Exchange (ICE) has become a major index in the international market. Therefore, it is consistent with international practice that CFETS publishes its RMB exchange rate index. Since the beginning of 2015, the trend of this index has been relatively stable. The index is 102.93 on November 30th, appreciated 2.93% from the end of 2014. This shows that, even though RMB has depreciated against USD since the beginning of this year, it has appreciated modestly against a basket of currencies. Therefore, RMB is relatively a strong currency among the major international currencies.

In other non-currency-war-sounding terms - the Trade-Weighted Yuan is still too strong.

And then this morning:

8:53:07 AM DJN - DJ CHINA'S CENTRAL BANK SIGNALS INTENTION TO LOOSEN YUAN'S PEG TO U.S. DOLLAR

The overnight weakness in CNH is now accelerating further...

The currency wars just escalated.

Or is it even easier than that... the last time China unleashed global volatility, The Fed folded like a cheap lawn-chair...

If The Fed folds now, it is a much bigger deal not only in terms of destruction of their credibility but also the fact that they have everyone on the same side of the boat positioned for liftoff. As we noted earlier, "anyone who claims it is not a huge deal is fooling you, as well as themselves."

Charts: Bloomberg