With offshore Yuan tumbling in recent days - echoing the collapse in US Treasury bond prices - the spread to the onshore fix appears to have forced the PBOC's hand. With a 200 pip cut in the CNY fix tonight, China has all but erased any strength in the Renminbi against the USD since it broke the peg ("enabled more flexibility") in June 2010.

• CHINA SETS YUAN FIXING AT 6.8115 VS 6.7885 DAY EARLIER

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Given the wakness in the Reniminbi basket, one could argue that the Yuan could be sold against the USD considerably more to catch down to the pressure that other major basket currencies have been under...

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With US Treasury market closed tomorrow, one wonders where China's wrath will fall...

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