USD: Gaining strength against CNY - Rabobank

Analysts at Rabobank explain that USD had another good day yesterday overall, particularly against CNY, the offshore variant of which (CNH) has now slumped from 6.26 to 6.36 since Wednesday morning.

Key Quotes

“For a currency that rarely weakens that much without official approval, it was an interesting development. Perhaps some of those recently suggesting we were going to break 6.00 for the first time might want to reassess(?) Partly that might be a secular shift back towards USD that is just getting underway, yet it was also linked to a shocking set of trade figures, where exports rose 11.1% y-o-y and imports surged 36.9%, which meant the trade surplus collapsed from USD54.7bn to USD20.3bn. Out of interest, China’s trade surplus with the US alone in the month was USD21.9bn. In the simplest terms, that means no juicy profits from selling to the US, and no Chinese trade surplus. Given we have potential US protectionism against China looming, that bears serious thought.”

“Meanwhile, already nervous markets today get to also worry about the US public finances, and from more than one angle. On one hand, the prospect of fiscal stimulus a-gogo is crystal clear; and on the other, a government shutdown looms if Senator Rand Paul can’t be persuaded to stop blocking the recently agreed bipartisan spending bill to keep the government open.”