Chinese yuan likely to trade in range of 6.50-6.70 in coming weeks - Scotiabank

On Wednesday morning, an article published on the website of the People’s Daily wrote that the People’s Bank of China governor Zhou Xiaochuan reiterated the requirements of holding the bottom line of no systemic financial risks and intensifying the yuan exchange rate formation mechanism reform, noted Scotiabank in a research report. Zhou also highlighted easing currency controls and slowly pushing forward the yuan internationalization.

“We expect the yuan to trade in a range of 6.50-6.70 with improving two-way flexibility in the weeks ahead”, stated Scotiabank.

There are negative worries regarding a political impasse in Germany that might undermine the euro in coming weeks. On Monday, the Social democrats stated that they continue to remain opposed to forming a coalition with Chancellor Angela Merkel’s conservatives and might push for a new general election. Given the tight correlation between the CNY and the EUR, the USD/CNY pair is expected to rally through the downward trend line but remain below 6.70, added Scotiabank.

At 12:00 GMT the FxWirePro's Hourly Strength Index of Chinese Yuan was highly bullish at 114.131, while the FxWirePro's Hourly Strength Index of US Dollar was slightly bearish at -52.5286. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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