FXStreet (Delhi) – Research Team at BofAML, suggests that the year has started with the RMB (both onshore and offshore) touching fresh lows versus the USD, driven by a confluence of factors including higher USD/CNY fixings, potential USD hedging demand ahead of Chinese New Year and speculative activity. Key Quotes “More importantly, the broader drivers of CNY depreciation as outlined in our Year Ahead remain unchanged: with US and China monetary policy diverging, the SDR decision behind us and the capital account becoming increasingly open, expending reserves to maintain a stable USD/CNY is unlikely to be in the interests of domestic policy. Indeed, the fixings have become more volatile and sensitive to broader US dollar moves over the past couple of months. And by referring to the importance of the trade weighted index, the PBoC has made it clear it would tolerate USD/CNY strength if the dollar broadly appreciates against China’s main trading partners. We remain long 6m USD/CNH forward outright but the current outright level at 6.8160 does not represent good risk-reward to enter new longs, especially given the CNH-CNY basis is at a new wide. This suggests a need to shift focus to CNY-proxies within APAC FX.” For more information, read our latest forex news.