Recent China developments created opportunities in FX markets

China's recent FX measures have given markets a feast for thought and created new opportunities in FX markets as year-end approaches. There is still a lively debate about what the August 11 measures, and the FX interventions that followed, imply for the value of the yuan and for the current and future pace of economic activity. 

"We have been bearish on Chinese growth relative to the consensus and therefore expected USDCNH to rise above forwards. But we believe that recent measures imply official acknowledgement that trend growth has finally been hit by the build-up in imbalances around an investment-/manufacturing-led growth model that no longer can be sustained", said Barclays in a research note to its client. 

The materialization of this reality is the most important development behind the revised outlook and FX forecasts since the last Global FX Quarterly.