USD/CNY is likely to trade in ranges - Westpac

Frances Cheung, analyst at Westpac, suggests that for the USD/CNY pair, upside risks remain, but for the moment is likely to trade in ranges.

Key Quotes

“Bond yields and CNY rates went onto a steady downward path in response to the monetary easing. The impact on FX is mainly reflected in the forward points than in spot, with the forward points falling steadily along with the narrowing China-US interest rate differential.”

“The CNY strengthened by around 2.8% against the US dollar over the past quarter. It underperformed the THB, IDR and MYR. CFETS index is up by about 2.3% since three months ago.”

“USD/CNY is likely to trade in ranges, at the 61.8% retracement/50DMA of 6.69/6.82, with upside risk as we remain cautious towards the development of USChina trade relations.”

“That said, USD/CNY is likely to be capped at the 6.85/6.90 area, with expected bond inflows a key support, when various indicators suggest no outflow pressure.”