China: March foreign reserves data preview – ING

Tim Condon, Chief Economist at ING, suggests that based on stable CNY policy and ING’s house view that USD/Majors will range trade in 2016 they revised their yearend USDCNY forecast to 6.47 from 6.65.

Key Quotes

“March foreign reserves data is due tomorrow. The consensus forecast is $3.196 trillion, which would be a negligible $6.3 billion decline from February. We credit the PBOC’s USDCNY fixing policy, which Governor Zhou characterizes as enhanced reference to a basket of currencies, and the tightening of exchange controls/macropru for slowing reserve outflows from the unsustainable $100 billion per month pace of November- January. We think there are strong economic and political reasons for the PBOC to stay the course.

Based on this and ING’s house view that USD/Majors will range trade in 2016 we revised our yearend USDCNY forecast to 6.47 from 6.65 (latest 6.48, Bloomberg median 6.70, forward 6.62).”