Great uncertainty over the outlook of Chinese policy – BBH

By FXStreet FXStreet (Delhi) – Research Team at BBH, suggests that there is a great uncertainty remaining over the outlook for China’s policy.

Key Quotes

“Now that it is in the SDR, many expect Chinese officials to intervene less on the currency, with some thinking that devaluation in August was only the “first bite of the cherry, the second bite is coming.” Others argue that foreign central banks will begin boosting their yuan reserves soon, and this will provide the offset to the private capital outflows. There is also speculation that China will increase the band in which it allows the dollar-yuan exchange rate to move (2% from the central reference rate, or fix).”

“There is scope for the PBOC to ease monetary policy. There are numerous economic reports that will be released in the days ahead. Ironically, they are accepted with less cynicism than the GDP figures. Of the reports, investors tend to watch the CPI and trade figures the closest. China is expected to report a record trade surplus, which is one of the arguments against a significant depreciation of the yuan. Exports and imports are still contracting on a year-over-year basis.”

“China’s CPI has been …read more

Source:: FX Street