China: Yuan likely to strengthen, no sizable devaluation on cards – Macquarie

By FXStreet FXStreet (Delhi): Research Team at Nomura, suggests that the there is no major devaluation of RMB in the near future and in contrast we can even see Chinese currency strengthening from these levels.

Key Quotes

“On Aug 27, we wrote that “We even see some risk that the RMB would strengthen from the current level of 6.40 as a way to reduce capital outflows.” Since then, the onshore CNY has strengthened to 6.35 while the offshore CNH is still traded at 6.47, posing a historically high gap between these two.”

“The gap has to narrow due to the presence of arbitrage opportunities. Most likely, the CNH will move towards the CNY, as it’s clear that the PBoC is determined to stabilize the RMB in the near term.”

“To be sure, we never believed the devaluation on Aug 11 started a large devaluation cycle, as we made a clear call the same day that sizable depreciation (>5%) by year-end is not very likely.”
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Source:: FX Street