The fall in the value of China’s yuan could be the trigger for the next big financial crisis, according to a report by Reuters citing EDL Capital, the Swiss-based macro hedge fund firm run by Edouard de Langlade.
EDL Capital has identified the slide in the yuan’s value as the next potential “black swan event” for global markets and according to a recent investor presentation seen by Reuters, is betting on further falls in China’s offshore currency.
With the US dollar having strengthened roughly 6% against the offshore yuan so far this year, Chinese state banks have been seen selling dollars in a bid to prop up the currency.
According to EDL, which manages about $1bn, the yuan’s fall has been prompted by ongoing geopolitical tensions between China and the US, as well as other western nations, the country’s faltering post-pandemic recovery, and the fact that China’s domestic labour market is now less competitive than other Asian countries including India and Vietnam.
