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China: Position for near-term stable RMB fixings - ANZ

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 13, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Delhi) – Research Team at ANZ, suggests that with the fix steady since Friday and the collapse in USD/CNH, offshore non-deliverable forwards have also seen an unwinding of long USD positions.

    Key Quotes

    “However, short dated NDFs are still trading with a large premium (in terms of forward points) over the fix. If indeed the PBoC continues to hold the fix steady in the near term as we expect, there could well be a further down-move in short-dated NDFs. This was the case during the September to October period last year, when steady/modestly lower fixes contributed to a fall in short-dated NDF points.

    As a tactical trading view, a one-week short USD/CNY NDF position could close with around a 100 pip profit if the fix remains the same as today’s in a week’s time. For a one-month position, the gain could be 500 pips, noting that this position will close right before the Lunar New Year holiday period (the fixing date is 5 February).

    Exactly how long the PBoC will maintain a stable fix remains to be seen. But with increased prominence now given to RMB stability in setting the fixings and a strong likelihood of wanting to avoid financial market volatility in the lead up to the Lunar New Year, we believe the fixings will be stable at least over the next few weeks. Hence, we recommend selling 1m USD/CNY NDF at 6.6100.”
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