18 Dec 2014
USD/CNY neutral bias – BTMU
FXStreet (Barcelona) - Lee Hardman, Currency Analyst at Bank of Tokyo-Mitsubishi UFJ, forms a neutral outlook for USD/CNY, anticipating thin liquidity in the week ahead due to PBOC signalling their preference for a weak Yuan.
Key Quotes
“Aside from the resolution of uncertainties surrounding Japan's elections and the FOMC, we think this week PBOC has also more clearly signaled its yearend USD/CNY preferences. which is likely to be to show a 2-3% yuan depreciation for this year. While we would hazard a guess the next day or two could see USD/CNY down, as has been typical whenever USD/CNY made a spirited move up the past two months, liquidity will really begin to thin next week so it seems more sensible to stay neutral.”
“Aside from the oiler bidding we've discussed for two weeks, what's probably even more impressive to us has been the seeming absence of USD supply on several days. If it's not outright capital outflows from China at this stage, we can't shake the feeling there will be a reversal coming sometime in the next couple of months. In this environment our core bias is to stay long gamma.”
Key Quotes
“Aside from the resolution of uncertainties surrounding Japan's elections and the FOMC, we think this week PBOC has also more clearly signaled its yearend USD/CNY preferences. which is likely to be to show a 2-3% yuan depreciation for this year. While we would hazard a guess the next day or two could see USD/CNY down, as has been typical whenever USD/CNY made a spirited move up the past two months, liquidity will really begin to thin next week so it seems more sensible to stay neutral.”
“Aside from the oiler bidding we've discussed for two weeks, what's probably even more impressive to us has been the seeming absence of USD supply on several days. If it's not outright capital outflows from China at this stage, we can't shake the feeling there will be a reversal coming sometime in the next couple of months. In this environment our core bias is to stay long gamma.”