7 Jun 2013
Flash: USD/CNY has a bearish bias – BTMU
FXstreet.com (Barcelona) - Bank of Tokyo Mitsubishi UFJ analysts see that USD/CNY has a bearish bias and looks set to range between 6.1150-6.1700.
Their view this week is heavily predicated on expectations that this weekend’s main release of monthly Chinese economic data will be less weak than market fears. They think authorities have been fixing downwards so that onshore guidance is skirting closer and closer to actual market conditions (ie, where the spot trades). Additionally, they think such moves have strengthened the onshore trading mechanism so that spot no longer hugs the strong side barrier of the trading band so obsessively, and that as the fix strengthens, the prospect for actual 2-way price action increases. That said, they write, “We still expect capital interest in China to remain very strong (judging by April banking system FX purchases) and as we have discussed before, regulatory changes such as SAFE’s new regulations cannot by themselves change the big picture for capital flows. We will be wrong if our economic expectations are confounded.
Their view this week is heavily predicated on expectations that this weekend’s main release of monthly Chinese economic data will be less weak than market fears. They think authorities have been fixing downwards so that onshore guidance is skirting closer and closer to actual market conditions (ie, where the spot trades). Additionally, they think such moves have strengthened the onshore trading mechanism so that spot no longer hugs the strong side barrier of the trading band so obsessively, and that as the fix strengthens, the prospect for actual 2-way price action increases. That said, they write, “We still expect capital interest in China to remain very strong (judging by April banking system FX purchases) and as we have discussed before, regulatory changes such as SAFE’s new regulations cannot by themselves change the big picture for capital flows. We will be wrong if our economic expectations are confounded.