Risk appetite; CNY bears not giving up – Rabobank

By FXStreet FXStreet (Guatemala) – Analysts at Rabobank noted as a consequence of low interest rates both the JPY and the EUR are funding currencies.

Key Quotes:

“As we have argued many times before, investors are more likely to short funding currencies when levels of risk appetite are strong, volatility is low and the carry trade becomes popular. Clearly this does not describe the current environment. Measured since the start of this year the EUR and the JPY are among the best performing G10 currencies despite the step up in dovishness from both the ECB and the JPY.”

“The decision by the PBoC to devalue the CNY last August brought China into the currency war and stimulated speculation that the value of the CNY could have a long way to fall. Although there are currently restrictions on short-sellers, the gap between the yuan’s on and offshore rates has expanded to its biggest level in 3 weeks indicating that CNY bears are not giving up easily.”

“The recent softening in the value of the USD will be viewed with relief by the Chinese authorities. Even so, against the backdrop of weakening growth and softening price pressures in China, in our view the CNY has the potential …read more

Source:: FX Street