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USD/CNY: bullish bias but watch intervention - BTMU

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Nov 19, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Guatemala) - Analysts at Bank of Tokyo Mitsubishi noted the conditions surrounding USD/CNY.

    Key Quotes:

    "The new-fangled restriction against onshore lending to offshore is some sort of an offshore interest rate defense of the currency. But foreigners are still not the key constituency: Main Street China is whom PBOC has to reassure. For such a heavily indebted economy, should push came to shove officialdom has to care more about the interest rate than the exchange rate.

    That view is behind a # of foreign house views for much higher USD/CNY. But knowing officialdom dare not spark capital flight, our expectation is still for more of a long (= lotsa reserves) losing (= sterilized intervention) battle. In the current market environment, while we have a bullish bias we cannot rule out intervention. The lack of lending in October probably meant a bigger headline shrinkage in industrial profits."
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