24 Mar 2015
Continue to expect medium-term gradual depreciation in RMB – JPM
FXStreet (Barcelona) - The Team at J.P.Morgan, maintains their medium-term depreciation view on RMB as China’s growth slows down, and further anticipate USD/CNY to drift higher towards 6.40 by year-end.
Key Quotes
“We maintain our medium-term depreciation view on RMB, reflecting China’s slowing growth, rising capital outflows and risk of competitive depreciation from Euro, Yen and other major EM currencies. CNY REER has appreciated by 3.8% YTD, following 6.5% appreciation in 2H14.”
“….concern on RMB valuation remains widespread especially considering potential more monetary easing from ECB and BoJ this year.”
“The recent downside surprises in China economic data also highlight that capital outflow risk will continue to be reinforced, not only reflecting the expectation of diverging China-US monetary policy cycle, but deteriorating average investment return in a broad sense. This may drive the capital outflows to shift to a more structural bias from current cyclical outflows.”
“We still expect the USD-CNY trading band to gradually drift higher in the coming quarters and likely widen before the end of the year, and for USD-CNY to end the year higher at 6.40.”
Key Quotes
“We maintain our medium-term depreciation view on RMB, reflecting China’s slowing growth, rising capital outflows and risk of competitive depreciation from Euro, Yen and other major EM currencies. CNY REER has appreciated by 3.8% YTD, following 6.5% appreciation in 2H14.”
“….concern on RMB valuation remains widespread especially considering potential more monetary easing from ECB and BoJ this year.”
“The recent downside surprises in China economic data also highlight that capital outflow risk will continue to be reinforced, not only reflecting the expectation of diverging China-US monetary policy cycle, but deteriorating average investment return in a broad sense. This may drive the capital outflows to shift to a more structural bias from current cyclical outflows.”
“We still expect the USD-CNY trading band to gradually drift higher in the coming quarters and likely widen before the end of the year, and for USD-CNY to end the year higher at 6.40.”