CNY: Downward pressure continuing - Westpac

The CNY and CNH underperformed regional peers in the past week, but movement has been in ranges, as investors weighed the risk from trade tensions against China’s pro-growth policy, points out Frances Cheung, Research Analyst at Westpac.

Key Quotes

“Downward pressure on CNY points appears to be continuing, on the diverging monetary policy between China and US. Any FX intervention can also potentially exert downward  pressure on the forward points.”

“China’s June forward book showed no net forward position, but we do not know if any FX operation had been done via other entities.”

“Offshore CNH points have been following onshore points lower, while there appears no shortage of CNH liquidity.”