While the Western world was off for Christmas and New Year’s, the Chinese appeared to have taken advantage of what was a pretty clear buildup of “dollars” in Hong Kong. Going back to early November, HKD had resumed its downward trend indicative of (strained) funding moving again in that direction (if it was more normal funding, HKD wouldn’t move let alone as much as it has). China’s currency, however, was curiously restrained during that time.

No more. Since the middle of last week, CNY has been sharply higher. All those “dollar” balances that were surely sitting in Hong Kong perhaps just waiting for year-end were moved almost all at once.

Why the rush?

Maybe there were some government concerns for those end-of-year activities in eurodollar markets that were clearly pushed askew by what’s going on over there across the Pacific. I’m not aware of any official deadlines or regulatory requirements that would have condensed the “dollar” flow into such a tight calendar space. It looks instead to have been related to market conditions, particularly since CNY wasn’t the only big mover during that time.

Gold, which fell off another (“dollar”) cliff in early December almost surely as a collateral substitute to UST repo, regained those losses in just those same four trading days (including today) coincident to CNY’s sharp climb.

While there is no official reason for the hurry in obtaining what was being stored in Hong Kong, unofficially there is always hinted official pressure for getting each and every calendar year off on the right foot. It’s not just China’s looming New Year Golden Week, January is always prioritized (technocratic Communism) in how things work for the Chinese.

They tend to front load almost everything, and given what CNY has done each of the past two Decembers there was no interest in even the slightest hint at repeating them. It’s the usual signature of China’s official sector including the PBOC – overdo it just to make sure.