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PBoC intervention - Nomura

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 12, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
    Likes Received:
    FXStreet (Guatemala) - Analysts at Nomura explained that they believe the funding squeeze in CNH started when the authorities began to sell USD/CNH aggressively.

    Key Quotes:

    "This followed the offshore and onshore spot RMB intraday basis widening to as much as around +1800pips on 6 January 2016 – the widest level on record. In our view, the risk of intervention was high given rising depreciation expectations, risk of more capital flight, and broader negative financial market impacts."

    "Indeed, the PBoC’s ability to create a funding squeeze and use of this as a tool to reduce long USD/CNH positions have become marginally easier now that CNH liquidity conditions have become less ‘loose’ thanks to falling CNH deposits and rising CNH loans in recent months."
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