CFETS RMB Index likely to fluctuate between 94.5 and 95 in coming weeks - Scotiabank

Since Beijing’s three-day Central Economic Work Conference concluded last Wednesday, the Chinese yuan has strengthened noticeably. During the meeting, Chinese top leaders analyzed the nation’s economic performance in 2017 and mapped out plans for next year, noted Scotiabank in a research report. The conference statement noted that prudent monetary policy should be kept neutral, the floodgates of monetary supply should be controlled, and credit and social financing should see reasonable growth, stated Scotiabank.

The proactive orientation of fiscal policy, in the meantime, would be maintained with the structure of fiscal spending to be optimized. China also repeated that it would keep the yuan exchange rate “basically stable at a reasonable equilibrium level,” while holding the bottom line of no systemic financial risks.

USD/CNY spot has stubbornly closed below the same day’s fixing, indicating sharp appreciation expectation of the CNY in spite of the rising 10Y UST yields. But the Chinese yuan has been overbought with rising risks of technical correction towards 6.58, said Scotiabank.

“The CFETS RMB Index is expected to fluctuate between 94.5 and 95.0 in the weeks ahead”, added Scotiabank.

At 13:00 GMT the FxWirePro's Hourly Strength Index of Chinese Yuan was highly bearish at -96.2112, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -21.5229. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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