USD/CNY is likely to remain in the 6.60-6.65 range – Westpac

Frances Cheung, Research Analyst at Westpac, notes that the expectations for tightening in Asia are building up, lending some support to Asian FX.

Key Quotes

“The PBoC did not pre-emptively grant MLF, breaking the recent pattern of their operations. We do expect the PBoC to roll over the MLF that matures later this month and do not foresee any liquidity squeeze around year-end as the central bank has a number of tools to be deployed. USD/CNY is likely to remain in the 6.60-6.65 range given stable liquidity and capital flow conditions.”

“China CPI to be released over the weekend will be closely watched, as the inflation outlook, apart from deleveraging efforts, is the key driver for the bond market. If CPI prints around 1.8-1.9%, the already stabilised sentiment is likely to be sustained.”