Big-news sounding headline, and definitely not off-topic, although the FX chart this morning was far from impressive.

Why isn't this topic generating more interest? Looks like it's being done smartly. Just a tad appreciation in the Yuan, and no drastic changes. It's like unlocking the door and leaving it closed. It leaves the possibility of opening the door slowly and steadily over time, as China reduces it's dollar holdings. The US has probably been active behind the scenes to arrange this. anyone brave enough to speculate what the new basket will consist of? my guess - mostly the dollar, then euro and then yen.

far from impressive? 2 figures in jpy, not too bad i thought....why is nobody talking about gbp in their potential basket?

You might be interested in this list of "homework problems" that I posted onto quantlib-usersNow that the renminbi has been de-pegged from the dollar, let me suggest some homework problems which might be possible using quantlib :-)1) Chinese currency is now fixed to a secret basket of currency. Derive a model which allows you to figure out what that secret basket of currencies is. It should be a simple matrix inversion problem, but the problem is that if you have small time series, then you get a singular matrix. If you have long time series, you end up with the possibility that the basket mix is changing. So there it becomes an interesting signal processing. This model becomes especially useful if it can throw up a red flag (pun intended) if the currency mix has changed.2) Using the model in 1) derive a model for that predicts the future value of the RMB. The easy part is to simulate assuming log-normal behavior in the currency basket values. The hard part is the model the fact that the rules of the game are made by the People's Bank of China and they can change them.3) Identify clever profit opportunities using some of the details of the rules of the new scheme. For example, the RMB is to be revalued once a day. You could use the model you develop in step 1) to arbitrage intra-day fluctuations in the basket of currencies. Also the rule that the currency is going to only fluctuate within 0.3% of the previous days value is "interesting"4) Using 2), develop derivative securities that will let you hedge or speculate on the value of the RMB. Price that security. You must take into account capital controls in and out of the PRC. These securities will likely be akin to Non-deliverable swaps and non-deliverable forwards.Example: Create a clever barrier option that separates out the risk due to "normal" currency fluctuations from the risk due to PBC intervention.5) Create a models that:5a) take into account correlations between the RMB and other currencies. Figure out ways of time arbitrage5b) take into account correlations between the RMB-US exchange rates and interest rates both in US treasuries and in PRC domestic interest rates6) Comment on the public policy big picture consequences of the above. Identify feedback cycles which are potentially destablizing to the world economic system.I'll be working on 1-6 in my spare time over the next few weeks. The reason that I'm posting to quantlib-jobs is that on my list of homework problems is7) Convince someone that it is worth paying me to work on problems 1 to 6....

Also, the RMB currency policy is now very similar to the one that Singapore uses. I'd be interested in hearing from anyone with experience in Singapore currency to know what technology traders use to "reverse engineer" their currency basket.

How do you take positions in CNY?It's not freely convertible, so can you somehow trade it outside China and as a non-participant in the inter-bank market? None of the spread-betting sites offer it (for obvious reasons), so short of physically buying/selling CNY or taking a bet on a CNY/JPY correlation, what do you suggest?

You can trade non-deliverable forwards

I'm working on a quantitative model of the new RMB regime. The only currencies that the RMB could be pegged to are the US dollar, the Euro, and the Yen. I sort of doubt that there is much weighting on the Yen, which leaves two currencies. If you have two currencies then you can calculate a weighting factor, which the PBC adjusts over time.One other thing, is that I suspect that we are moving toward an "oligarchical" currency system in which there are a small number of market leaders, with the other currencies effectively pegged to a weighting of the lead currencies. Lots of opportunities for statistical arbitratage.

The problem with CNY is completely different than SGD. Sing MAS puts forth charts that is traded against the NEER and comes out right about whether they changed the policy, allowed for appreciation, and locked in a "trading range" where they might/or might not intervenne. However, the SGD is traded daily where the MAS can intervenne at anypoint where as the CNY is only adjusted according the the reference basket, traded on the SAEC, and not open to any outsiders. Both are interesting problems but there are probably more "tradable" opportunities with SGD, or for that matter, the INR (if anything), than trying to trade against CNY vs reference basket. Not that you cannot do it, but I don't see the point until more of the dust settles. As far as "reverse engineer" the SGD basket, I still occasionally monitor that trade so I cannot give away too much of what my group does. However, most places do try to look at Sing's trade partners to determine the currency basket. This makes sense economically as to minimize impact on Import/Export. Otherwise, different house have different ways to calculate the basket.With regards to opportunities for Stat-Arb, good luck. I haven't found anything worthwhile yet but maybe you can. And even when I think I found something, currency markets are the least bit predictable and the bleed between countries really isn't your best friend.