Some thoughts from around the place on the yuan weakness
SG:
- USD/CNY in the past week is "clearly a trial balloon" (in response to trade threats)
- Too much depreciation could be counterproductive (SG mention what happened in 2015-2016)
- And also counterproductive to China's internationalization objectives - attracting foreign equity/bond capital
- Highlight the risk here, though, in 2015-16, a consolidation phase ensued following upward moves in the range of 3.5%-5%
SG do say though that independent of trade wars, CNY could drop toward 6.75/USD as EM currencies soften in the second half of this year
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UOB:
Looking for the rally to halt soon - the bank highlight the extent of the move so far in context (ps. this from prior to today's mid rate setting:
And add:
- Our base case remains for steady GDP growth for China at 6.7% YoY for FY18 and we see an eventual de-escalation of trade tensions.
- As such, while there will be near term CNY weakness because of the very fragile investor sentiment, CNY is expected to stabilize quickly should there be any signs of progress in trade negotiation between US and China.
I bolded that bit from UOB - makes sense given the trade tensions driving it.
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Gotta say, I like the UOB comparison of the extent of rallies and where this one fits in and hence its near an end.
But …
But …
But ...
as to divining the intentions of the People's Bank of China and the wider Chinese administration - not my forte and I'll decline.
