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- CNY to take a breather from its appreciation – HSBC
CNY to take a breather from its appreciation – HSBC
FXStreet reports that economists at HSBC think the Chinese yuan can still outperform many other currencies in its basket, supported by bond inflows.
“Markets may be starting to have concerns about a slowdown in China’s recovery from here. That said, we believe the People’s Bank of China (PBoC) will keep the overall monetary policy stance accommodative.”
“For the CNY, the current situation looks quite similar to 4Q17. In September 2017, as the China Foreign Exchange Trade System (CFETS) RMB Index rose to around 95 and China’s growth data showed signs of peaking momentum, the PBoC lowered the foreign exchange (forex) risk reserve ratio for forward forex trading from 20% to 0%. The first removal of the forex reserve requirement in September 2017 did not lead to a complete reversal for the downward trend in USD/CNY, but there was a pause in 4Q17 before the CNY resumed appreciating in 1Q18. Similarly, this time around, we think there could also be a pause in the CNY’s appreciation for similar reasons, as well as due to potential uncertainty around the US elections.”
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