Guess what? Folks are trading the yuan.

Over the last three months, markets have been at pains to discern what the controlling factor is for the Chinese currency’s rapid depreciation.

To be sure, everyone can make a list of the contributing factors, it’s just a matter of deciding which one takes precedence.

The narrative here is simple. Some combination of trade war jitters, decelerating Chinese economic activity and monetary policy divergence between the Fed and the PBoC pushed the yuan to its weakest against the dollar since last summer.

In early June of 2017, the PBoC engineered an epic short squeeze in the currency by instituting a laughably opaque “counter-cyclical adjustment factor” in the daily fixing. That arguably served to roll back some of the liberalization that was supposedly inherent in the 2015 devaluation. In the months after the CCAF was introduced, the yuan staged a record-setting rally. Through September 4, 2017, for instance, the offshore yuan rose for 14 consecutive sessions against the dollar, prompting China to slam the brakes on by lifting rules on forwards put in place in 2015. In short, that didn’t work. The yuan weakened initially but strengthened anew going into 2018. In January, the PBoC repealed the CCAF in another effort to put the brakes on the yuan rally, but that didn’t work either.

What did “work”, though, when it came to arresting the rally in the yuan, was Donald Trump’s decision to launch an all-out trade war with China. That, coupled with a Fed that remained steadfast in its relative hawkishness against a backdrop of a U.S. economy turbocharged by late-cycle stimulus, ended up catalyzing a rapid reversal of fortunes for the yuan, which weakened at the fastest pace since 2015 through July. The PBoC was happy to countenance that depreciation because after all, it ultimately negated the effects of the first two rounds of 301 investigation-related tariffs before they were even fully implemented.