USDCNY: Risks of a hawkish Yellen - MUFG

Lee Hardman, Currency Analyst at MUFG, suggests that RMB is normally not USD-dependent but with so much attention on Chairwoman Yellen, what she says at Jackson Hole should spill over.

Key Quotes

“A hawkish tone, meaning September is more in play than the current 28% odds give it, may mean a short bounce higher, especially for USD/CNH. Otherwise, stabilization/narrower ranges remain the themes of August ahead of the G20. If we are wrong and Yellen surprises with dovishness, we think the Chinese will protect 6.6200 as they did last week. Developments continue to suggest more RHS movement eventually.

We're not surprised at news of property developers stepping up conversion of USD debt, which we had written about before. Capital probably continues to flow offshore, seen in bids for HKD. And by now, 3mmas of MNI/TCB leaders are definitely pointing to upturn so logically, upcoming CFLP/Caixin PMIs should, too. But there's not much anecdotal evidence to support an upturn. Eg, why would local government revenues have declined sharply in June and July if the economy is turning around?”