RMB depreciation to remain a prominent theme for EM and Asia FX – Nomura

Nomura Global FX Strategy expects RMB depreciation to remain a prominent theme for EM and Asia FX over the next few months, and are currently holding a long USD/CNH position in our portfolio.

Key quotes

The main rationale for this trade includes the risk of faster hikes from the US Fed, increased geopolitical tensions in the region and direct risks to China from President-elect Trump’s policy including naming China a currency manipulator, or worse, imposing tariffs on Chinese products

However, we note that policy actions since the start of the year have increased the potential volatility in this trade, warranting some caution.