CNY: No longer top of the pops in Asia - Westpac

The Chinese yuan is no longer top of the pops in Asia, tumbling to be the weakest non-Japan Asian currency over the past week, notes Sean Callow, Research Analyst at Westpac.

Key Quotes

“A turning point of some sort appears to have been reached. As China Daily explained, the “PBOC scrapped a rule this week that requires banks to reserve a 20 percent deposit on forward sales of foreign exchange, a sign that the central bank has relaxed capital controls.”

“That article’s claim that USD/CNY will become more two-way and flexible seems a reasonable expectation in the weeks ahead. Anywhere between 6.50 and 6.60 seems plausible near term. If USD gains further support from bouncing Treasury yields in the week ahead, most trade should be in the 6.55-6.60 area rather than revisiting 6.50.”