China: Challenge is keeping CNY “basically stable” - Westpac

Sean Callow, Research Analyst at Westpac, suggests that the China’s return from its week-long holiday has seen the trade-weighted yuan strengthen slightly.

Key Quotes

“But obviously that is not the dominant narrative, with USD/CNY sailing through the previously electrified 6.70 level, amid broad-based USD gains. A sustained period of dollar strength (perhaps until the Dec FOMC meeting) would be quite problematic for a number of Asian policymakers. For China, the challenge is keeping CNY “basically stable” against the basket while keeping a lid on local investor depreciation expectations against USD. Our DXY suggests USD/CNY targets 6.75, USD/CNH 6.76-6.77 and the 12mth NDF 6.95.”