USD/CNY: China's coping hitting limits - BTMU

Analysts at BTMU explained that their final year-end forecast for USD/CNY, which didn't make it into our last monthly, was 6.95 and was meant to convey a message.

Key Quotes:

"That in December Chinese authorities would work very hard to keep this cross below 7. And though it appears they have succeeded we find it difficult to believe officials will be much reassured. Even if on the night before Christmas not a pip (or peep) is out of place (not even a mouse), in both FX and rates, it is entirely possible December will see a larger foreign reserve loss than in November.

And despite having thrown another wall of liquidity at the problem, Chinese rates nearly ran away anyway.

Market prices are beginning to suggest China's coping methods may be hitting limits, a suggestion which makes no sense if underlying problems are indeed being solved. Next year promises to start with no fewer challenges."