RMB developments suggest a faster move towards fair value – Nomura

By FXStreet FXStreet (Delhi) – Yujiro Goto, Research Analyst at Nomura, suggests that their view to be broadly long USD/Asia in 2016 remains intact.

Key Quotes

“Specifically, we highlighted that China would be a significant driver, given RMB depreciation and downside risks to the economy. There have been a few important developments on China, including: 1) a significant 1.9% depreciation of CNY (vs. USD) on a spot basis from 7 December 2015 to 4 January 2016 (20 sessions); 2) the People’s Bank of China (PBoC) announced (11 December) an increased focus on the CNY trade weighted exchange rate and; 3) three consecutive large positive errors on the USD/CNY fixing (totalling +163pips) to 4 January 2016.

These developments are consistent with risks we had highlighted previously that USD/CNY could reach 6.80 earlier than our end-2016 forecast. In addition, there are regional risks that CNY-sensitive FX (mainly Northeast Asia, SGD and MYR), through economic and financial channels, will experience more depreciation pressure in the short-term.”
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Source:: FX Street