China To Devalue Yuan Soon After IMF’s SDR Inclusion?
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By Shuli Ren
Bank of America Merrill Lynch thinks so. The bank thinks China will devalue the yuan by 3-4% in the second week of December after the IMF decides on the SDR matter on November 30.
“The RMB could be deceptively stable over the next couple of weeks but reduced intervention and a more flexible fixing would inevitably be associated with a weaker currency – we would potentially look to add to CNH shorts soon after the SDR decision on Nov 30,” wrote Merrill’s currency analysts. The bank sees the yuan to fall to 6.90 by the end of 2016.
This month, the People’s Bank of China allowed its onshore yuan fix rate to weaken for 10 consecutive days (November 3 – November 16), before the bank intervened in the offshore market on Monday to make its yuan look better before the SDR decision. The PBoC may be feeling the pressure from financial media, including this blog: “UPDATE Yuan’s Losing Streak Longest Since 2008 Ahead of IMF’s SDR Inclusion.”
“The steady move higher in the USD/CNY fixing suggests the PBoC would allow the fixing to be more sensitive to broader US dollar trends than previously,” wrote Merrill.
In addition, investors are markedly bearish towards the yuan:
At our recent China conference in Beijing (Nov 3rd), 60% of the audience polled felt the PBoC was behind the curve in monetary policy easing. 56% felt CNY would depreciate by 5% end 2016 and 31% polled believed in a depreciation of more than 5%.
Ahead of the IMF meeting, the PBoC is trying to make it harder to short yuan offshore. Bloomberg reported:
The People’s Bank of China has given verbal guidance to onshore banks to stop offering cross-border financing to offshore lenders, according to people familiar with the matter. The authority has also told overseas banks to halt onshore bond repurchases, they said.
The measures “tighten up the offshore yuan’s liquidity,” discouraging sales of the currency, said Ken Cheung, a Hong Kong-based currency strategist at Mizuho Bank Ltd. “The policy change serves to close the gap between the onshore and offshore yuan and curb capital outflows after the reserve-currency bid.”
The PBoC guided the fix rate weaker in the last two days – even though the dollar weakened – to 6.3780 today. Onshore yuan trades at 6.3826 recently, while offshore yuan is at 6.4069, 243pips lower.
Merrill is not the only bank that worries about the devaluation of the yuan. See my earlier blog “Goldman: Emerging Markets To Pick Up In 2016, Yuan The Most Worrying”
Overnight, the Powershares DB US Dollar Bullish Fund (UUP) fell 0.7%, the Duetsche X-Trackers Harvest CSI 300 China A-Shares Fund (ASHR) jumped 1.4%, and the Market Vectors China ChiNext ETF (CNXT) soared 3.5%, he iShares China Large-Cap ETF (FXI) rose 0.1%, the iShares MSCI China ETF (MCHI) gained 0.2%.
http://blogs.barrons.com/asiastocks/2015/11/20/china-to-devalue-yuan-soon-after-imfs-sdr-inclusion/ 
หลังหยวนเข้า SDR ของ IMF เงินหยวนจะอ่อนค่าลง เมกาจะยอมหรือ
Email
Print
smaller
Larger
By Shuli Ren
Bank of America Merrill Lynch thinks so. The bank thinks China will devalue the yuan by 3-4% in the second week of December after the IMF decides on the SDR matter on November 30.
“The RMB could be deceptively stable over the next couple of weeks but reduced intervention and a more flexible fixing would inevitably be associated with a weaker currency – we would potentially look to add to CNH shorts soon after the SDR decision on Nov 30,” wrote Merrill’s currency analysts. The bank sees the yuan to fall to 6.90 by the end of 2016.
This month, the People’s Bank of China allowed its onshore yuan fix rate to weaken for 10 consecutive days (November 3 – November 16), before the bank intervened in the offshore market on Monday to make its yuan look better before the SDR decision. The PBoC may be feeling the pressure from financial media, including this blog: “UPDATE Yuan’s Losing Streak Longest Since 2008 Ahead of IMF’s SDR Inclusion.”
“The steady move higher in the USD/CNY fixing suggests the PBoC would allow the fixing to be more sensitive to broader US dollar trends than previously,” wrote Merrill.
In addition, investors are markedly bearish towards the yuan:
At our recent China conference in Beijing (Nov 3rd), 60% of the audience polled felt the PBoC was behind the curve in monetary policy easing. 56% felt CNY would depreciate by 5% end 2016 and 31% polled believed in a depreciation of more than 5%.
Ahead of the IMF meeting, the PBoC is trying to make it harder to short yuan offshore. Bloomberg reported:
The People’s Bank of China has given verbal guidance to onshore banks to stop offering cross-border financing to offshore lenders, according to people familiar with the matter. The authority has also told overseas banks to halt onshore bond repurchases, they said.
The measures “tighten up the offshore yuan’s liquidity,” discouraging sales of the currency, said Ken Cheung, a Hong Kong-based currency strategist at Mizuho Bank Ltd. “The policy change serves to close the gap between the onshore and offshore yuan and curb capital outflows after the reserve-currency bid.”
The PBoC guided the fix rate weaker in the last two days – even though the dollar weakened – to 6.3780 today. Onshore yuan trades at 6.3826 recently, while offshore yuan is at 6.4069, 243pips lower.
Merrill is not the only bank that worries about the devaluation of the yuan. See my earlier blog “Goldman: Emerging Markets To Pick Up In 2016, Yuan The Most Worrying”
Overnight, the Powershares DB US Dollar Bullish Fund (UUP) fell 0.7%, the Duetsche X-Trackers Harvest CSI 300 China A-Shares Fund (ASHR) jumped 1.4%, and the Market Vectors China ChiNext ETF (CNXT) soared 3.5%, he iShares China Large-Cap ETF (FXI) rose 0.1%, the iShares MSCI China ETF (MCHI) gained 0.2%.
http://blogs.barrons.com/asiastocks/2015/11/20/china-to-devalue-yuan-soon-after-imfs-sdr-inclusion/