CNY: What’s been driving a stronger renminbi? – MUFG
|The main economic data release overnight was the latest CPI report from China for July, MUFG FX analyst Lee Hardman notes.
USD/CNY rises back towards the 7.1800 level
“The report revealed that headline inflation picked up modestly by 0.3 points to 0.5% in July. The core measure on inflation fell to 0.4% in July from 0.6% in May-June. The release of the latest PPI report revealed that producer price deflation continued as it fell by an annual rate of -0.8% in July. Overall, the inflation developments alongside the recent loss of growth momentum in Q2 will keep pressure on the PBoC to lower rates further his year.”
“The renminbi has given back some of its recent gains over the past week. After hitting an intra-day low of 7.1153 om 5th August, USD/CNY has since risen back towards the 7.1800-level. The renminbi has benefitted alongside the yen and other Asian currencies from the recent bout of position liquidation as popular short positions have been pared back.”
“It has meant that the renminbi has strengthened following the PBoC’s decision to cut rates further towards the end of last month. While yields in China have continued to fall over the past month, it has been more than offset by the larger drop in US yields as market participants have moved to price in a higher probability of more aggressive Fed rate cuts.”
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