Chinese yuan likely to range trade prior to Trump-Xi Summit, remain susceptible to US-China bilateral relations: Scotiabank

The Chinese yuan is expected to range trade prior to the Trump-Xi Summit set for 1 December, while remaining susceptible to the headlines on US-China bilateral relations, according to the latest research report from Scotiabank.

The PBoC released its third quarter monetary policy implementation report last Friday, pledging to maintain its prudent and neutral monetary policy and make policies more forward-looking, flexible and targeted.

The central bank sees trade frictions leading to relatively big uncertainties for China’s future exports. Compared to the central bank’s Q2 monetary policy implementation report, the Q3 report has important adjustments in the future monetary policy, anti-risk measures, exchange rate policy and other aspects, the report added.

Regarding the exchange rate policy, the PBoC said it will "enhance macro-prudential management when necessary," while deleting the statement that "increasing the market role in determining the yuan exchange rate" in the latest report. It may mean that the central bank will roll out more measures to stabilize the yuan exchange rate in the future if needed.

The yuan is facing increasing depreciation pressure amid China’s economic slowdown as indicated by the nation’s declining official manufacturing PMI, cooling PPI inflation and shrinking passenger car wholesale.