CNY: Successful shift in China’s FX policy - SocGen

Kit Juckes, Research Analyst at Societe Generale, suggests that this week’s big story is surely the successful shift in China’s FX policy.

Key Quotes

“A year ago, USD/CNY was trading at 6.21 and just beginning it’s rapid jump (it reached 6.4 in August 2015). December/January saw another sharp fall by the Yuan, but since April, the tactic has shifted to a slower move that has ruffled remarkably few global feathers.

Overall, it’s a 7.4% USD/CNY rise in a year, an 8.4% rise in EUR/CNY and a 23% fall in CNY/JPY. That’s a lot of deflation being exported to the G3 and it’s very unlikely we’re done yet. I know markets are quiet and risk appetite is strong, but a gradually slowing Chinese economy, weak global trade and a steadily depreciating Yuan don’t make a healthy recipe for FX yield-hunters beyond the short-term. Biding time and setting new shorts in trade-sensitive currencies in due course feels right.”