CNY: Renminbi to weaken further in the aftermath of rate cut – MUFG
By FXStreet FXStreet (Delhi) – Lee Hardman, Currency Analyst at MUFG, notes that the PBoC became the latest overseas central bank to ease monetary policy further on Friday when it announced that it will lower their one-year lending rate by 0.25 percentage point to 4.35%, and the reserve ratio by 0.50 percentage point to 17.50%.
Key Quotes
“The deposit rate ceiling was also scrapped. It was the fifth time this year that the PBoC has lowered the one-year lending rate which clearly highlights that they remain firmly in easing mode to support economic growth.”
“The Chief Economist at the PBoC’s research bureau has been cited as stating that the policy measures reflect the recent economic situation including downward pressure on the economy, the accelerating drop in producer prices, and changes in international payments.”
“Increased capital outflows are tightening liquidity conditions in China prompting the PBoC to implement offsetting liquidity boosting measures. The weakening growth outlook and looser monetary policy will both reinforce expectations that the renminbi will weaken further ahead and weigh on other Asian currencies as well.”
“Investor expectations are low that the stimulus will prove effective at generating a cyclical economic rebound in China. Rather the announcement has initially reinforced concerns over slowing growth in …read more
Source:: FX Street
