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24 Feb 2014
Flash: CNY slide putting pressure on a long market - RBS
FXStreet (Bali) - According to Greg Gibbs, FX Strategist at RBS, recent weakening in CNY onshore and CNH offshore is attracting considerable interest.
Key Quotes
"The steady appreciation and positive carry in CNY has attracted considerable foreign investor demand over recent years and thus positioning is probably quite long and experiencing a rare period of losses."
"How CNY trades after the G20 meeting this week will be important with some thinking the fall in CNY was encouraged by the Chinese government ahead of the G20 for a variety of political reasons discussed by Gao Qi."
"The other theory is that it may relate to Chinese government or market concerns over the slowing Chinese economy and stress on the financial system generated by shadow banking uncertainty. Perhaps the Chinese government is encouraging an easier policy stance to counter recent weakness in activity and business sentiment. In other words it may be fine-tuning its monetary policy stance toward being easier after tightening conditions since Q3 last year."
"Interest rates in China from one to 10 year maturities have eased in the last week to lows since mid-Dec. This is a double-edged sword for commodity currencies and risk appetite. On the one hand it might be a clearer indication of weaker growth. On the other hand it implies China is acting to support growth."
Key Quotes
"The steady appreciation and positive carry in CNY has attracted considerable foreign investor demand over recent years and thus positioning is probably quite long and experiencing a rare period of losses."
"How CNY trades after the G20 meeting this week will be important with some thinking the fall in CNY was encouraged by the Chinese government ahead of the G20 for a variety of political reasons discussed by Gao Qi."
"The other theory is that it may relate to Chinese government or market concerns over the slowing Chinese economy and stress on the financial system generated by shadow banking uncertainty. Perhaps the Chinese government is encouraging an easier policy stance to counter recent weakness in activity and business sentiment. In other words it may be fine-tuning its monetary policy stance toward being easier after tightening conditions since Q3 last year."
"Interest rates in China from one to 10 year maturities have eased in the last week to lows since mid-Dec. This is a double-edged sword for commodity currencies and risk appetite. On the one hand it might be a clearer indication of weaker growth. On the other hand it implies China is acting to support growth."