RMB depreciation taking its toll on the markets – Goldman Sachs

By FXStreet FXStreet (Delhi) – Robin Brooks, Research Analyst at Goldman Sachs, suggests that just to underscore how unsettled markets are by a week of RMB depreciation, a meaningful positive surprise on payrolls failed to lift risk markets, US interest rates or the Dollar.

Key Quotes

“Cyclical outperformance is alive and well, but all that matters these days is whether the next $/CNY fix is a basis point or two above the level anticipated by the market. Let us make a belated new year’s resolution to focus on the fundamentals that are really driving things rather than what is in the end a small move in global currency markets.

Not to belittle this week’s price action. Consecutively weaker $/CNY fixes early in the week scared markets and had them worried that this is the beginning of a largescale devaluation. In the event, Friday’s fix was substantially below the previous spot close, a deviation from the previous PBoC commitment to factor in the previous close.

Conceivably, this deviation could signal a desire to settle down global risk and currency markets, suggesting that coming fixes might slow or even reverse the recent pace of depreciation. In today’s Daily, we interpret recent RMB moves, complementing our China …read more

Source:: FX Street