FXStreet (Delhi) – Research Team at BNP Paribas, notes that the USDCNY reached a new high this morning at 6.4250 as Chinese authorities allowed further RMB depreciation. Key Quotes “This trend is consistent with our expetctations that the pair will trend towards 6.60 during 2016 as the USD rebounds. Such expectations signal a continuation of the move higher in USD/Asia (our EM strategists recommended long USDTWD this week) and should also lend support to a break higher on USDJPY. This pair is unusually lagging behind the latest sharp rise in US 2 year yields (see chart).” “We target 126 by yearend and beyond 130 into 2016. The lag may be explained by risk-off characteristics with the USD gaining ground vs. EM and commodity exporter currencies but weakening vs. the low-yield funding currencies. EURUSD traded up to just above 1.09 and USDJPY pushed below 123 despite a small uptick in US front-end yields.” “The dynamic continues to demonstrate the attraction of running USD longs vs. commodity bloc currencies, with these trades benefitting both from broad USD gains and from periods of elevated risk aversion.” “We remain short AUDUSD from 0.7335 and, with the recommendation now 1.7% in the money, we are trailing our stop to entry. Meanwhile, while EUR and JPY shorts are clearly more susceptible to squeezes, we think levels are getting increasingly attractive for adding USD longs vs. these currencies as well, particularly given the very flat level of FX positioning now signalled by our BNP Paribas position analysis framework.” For more information, read our latest forex news.