Offshore Yuan Index

We have DXY, the dollar index, and JXY for Yen, EXY for Euro, CXY for CAD, BXY for pound. Since I watch USD/CNH, I decide to make my own index for yuan.

Table of Contents

Introduction to DXY, the Dollar Index
TradingView Spread Symbol for Yuan Index
Correlations
See Also

Introduction to DXY, the Dollar Index

DXY: https://www.wikiwand.com/en/articles/U.S._Dollar_Index

It is a weighted geometric mean of the dollar's value relative to following select currencies:
Euro (EUR), 57.6% weight Japanese yen (JPY), 13.6% weight Pound sterling (GBP), 11.9% weight Canadian dollar (CAD), 9.1% weight Swedish krona (SEK), 4.2% weight Swiss franc (CHF), 3.6% weight

USDX = 50.14348112 × EURUSD^-0.576 × USDJPY^0.136 × GBPUSD^-0.119 × USDCAD^0.091 × USDSEK^0.042 × USDCHF^0.036

Surprisingly, SEK is one of the components (and it has a higher weight than CHF). I think it's because of its strong economy and oil exports.

AUD is not part of the formula.

TradingView Spread Symbol for Yuan Index

https://www.tradingview.com/support/solutions/43000502298-spread-charts/

First Version

After some prompt engineering, I end up with this TradingView symbol that works:

(1 / USDCNH ^ 0.576) * (CNHJPY ^ 0.136) * (1 / CADCNH ^ 0.091) * (EURCNH ^ -0.576)

And it looks like this (monthyly charts):

As a sanity check, I confirmed that both charts' troughs and peaks align - I'm happy with the result. :)

Adjusting Weights Based on Trade Volume

https://www.wikiwand.com/en/articles/List_of_the_largest_trading_partners_of_China

After feeding this info to the LLM, I end up with this:

(1 / USDCNH^0.7288) * (CNHJPY^0.3488) * (HKDCNH^0.3161) * (AUDCNH^0.2513) * (SGDCNH^0.1189) * (GBPCNH^0.1075) * (1/ CADCNH^0.0976) * (EURCNH^ -0.8588)

This version includes major currencies at the top of the table on that Wikipedia page.

It's more diverse since HKD, SGD are included. Pound and Aussie $ too.

2nd version of yuan index, monthly chart, with a ridiculously long symbol 🤗

Conclusion

I have no confidence in how the LLM assigns weights and I'm more comfortable using CNHUSD as a proxy for strength of yuan, but it was fun plotting this crazy chart. :)

Correlations

Weekly Chart - S&P 500, Bond Yield (US10Y), Copper, DXY, Yuan Index, USDCNH

DXY clearly moves in the same direction of bond yield.

Copper is on the chart just because its high correlation to Yuan (CNHUSD).

https://www.forex.com/en/news-and-analysis/copper-strength-signaling-stronger-yuan/

Copper is often referred to as “Dr. Copper” because it is used to gauge the health of the global economy. If the price of copper is moving higher, the world economy is thought to be strengthening. However, if the price of copper is moving lower, the world economy is said to be sick, or weakening.

Yuan has been falling for a long time, and it's expected to continue falling due to falling interest rates and recent PBOC's decision to further cut the reserve requirement ratio - does a weakened yuan implied weak global economy, or just in 1 country?

(Daily charts) See the purple boxes - how a rising Yen and the unwinding of carry trade caused the 8/5 mini crash

During the 7/10 - 8/6 Yen bull run, dollar and yuan were depreciating against Yen, but dollar was depreciating faster.

The strong recovery of SPX since 8/5 was accompanied by a pullback on Yen.