HSBC on the PBOC rate hikes and where to for the yuan in 2018
Remarks from HSBC overnight on the People's Bank of China moves yesterday
(what moves, you ask - check 'em out here from yesterday:
- China injects funds through MLFs, raises MLF & RR rates
- "PBOC Raises Market Borrowing Costs in Surprise Move After Fed"
OK .... back to HSBC (in brief and bolding mine):
- Market participants have been debating whether the PBoC would follow the Fed in raising interest rates, and the onshore rates market has indeed made some adjustments in preparation (bonds have already sold off).
- PBoC also conducted CNY288bn of MLF which should ease seasonal RMB funding concerns heading into the year-end.
- We believe this 5bp rate hike should not have too much impact on the RMB.
- HSBC expects the PBoC to maintain a neutral monetary policy stance (but with a slight tightening bias). This will keep China-US rate differentials relatively wide, which would help the RMB to navigate through US tax reforms and future Fed hikes.
- We see USD-RMB trading with two-way flexibility around 6.60 in 2018.