Mkt sees yuan deval as a result of trade frictions with China, but that's a slice of what's going on.
The real story here is commodity based collateral, primarily gold.
There is currently 1000 tons of $GLD pledged as collateral (likely a low ball estimate) in China, equivalent to $42bn or 352k futures contracts, that has been accumulated over the past few years.
This really hasn't mattered or been a tell until now.
Many haven remarked about the correlation between the Yuan and Gold - 'likely due to deflation, or pegging the currency to gold'.
What's going on here is borrowers are getting margin called, reclaiming the collateral and selling it in the market.
This is may be a reason why we're seeing record gold shorts, which is equivalent to half the value of gold backed collateral.
The currency is reflecting the stress that is going on in China, which is further evidenced by the lack of response gold has had to any geopolitical escalation, as lenders liquidate to reclaim some value.
As the stress has grown so too has the correlation, as shown above. Right now we're in the middle of a Chinese credit crunch that the market sees as a result of trade tariffs.
The tariffs are a marginal slice of what is really going on and it's starting to show up in the #s
The last point I'll leave you with is that China is cutting reserve requirements, but the is no reciprocal increase in M1.