Conflicting views on the Chinese currency
Morgan Stanley like yuan, citing (in brief)
- we believe the downside of owning CNH is very limited now as the authority is likely to keep a stable or stronger currency.
- Meanwhile, there are a few data points from China (credit growth, CPI and trade balance) this week and our economist is more bullish on most of the data vs the Street. e recommend selling USD/CNH, along with our more structural bullish view on CNH vs SGD, as we expect CNH to strengthen in trade-weighted basket terms. The risk to the trade is downside surprise in Chinese data.
Citi says they expect the appreciation bias for yuan to strengthen near-term, citing
- improving chance of a trade deal
- little PBOC intervention
- better-than-expected data
- an easing in capital outflow pressures
Commerz:
- say traders will be cautious as the US and China have not yet reached a deal
- see yuan falling moderately
- longer term depends on the deal details
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Daily CNH chart:
