By FXEmpire.com
Outlook and Recommendation
The USD/CNY has been relatively stable all year as forecasts for current account surpluses have narrowed, the central bank has made subtle shifts to their tone and the voice of those looking for CNY appreciation have faded. We have shifted our USDCNY forecast to reflect this, still looking for appreciation, but at a slower pace. We hold a USDCNY year-end target of 6.18.
The pair ended the month at 6.3108
China advanced the process of capital account liberalization in April by widening the trading band of the Chinese Renminbi (CNY) versus the USD. Nevertheless, there is no express guarantee that CNY appreciation is the preferred policy for the country’s authorities. In fact, with US$3.3 trillion in foreign exchange reserves, the central bank maintains the ability to place the USDCNY exchange rate at whatever level is needed to ensure trade competitiveness. In fact, non-deliverable forward contracts discount that the CNY will depreciate further over the next 12 months. However, we are of the view that the yuan will gradually strengthen and close the year at 6.18 per USD.
On the growth front, we believe that the economic deceleration bottomed out during the first quarter of the year (real GDP expanded at a year-over-year rate of only 8.1%) and that the economy will expand by 8.4% as suggested by positive manufacturing activity trends since the beginning of the year. Given the growing political sensitivities associated with China’s currency regime during an election year in the United States, bilateral trade and rhetorical friction may intensify in the months ahead. Despite initial steps to introduce more flexibility into China’s exchange rate arrangement, we firmly believe that China will not alter the course of reforms drastically to destabilize the global financial system and that the USD will maintain its role as the world’s preeminent reserve currency.
Central Bank Name: Peoples Bank of China
Date of next meeting or last meeting: TBD
Current Rate: 6.56 % (+ 0.25)
Statement highlights of last meeting: The participants analyzed current economic and financial situations at home and abroad. In their view, both the real sector and financial sector in China were moving in the direction intended by the macroeconomic management policy, the economy grew in a stable manner, while the growth of the general price slowed down. On the international side, although the European debt crisis abated and the global economy recovered moderately, uncertainties remained.
Important Economic events for the month of May affecting AUD, CNY, JPY, NZD and USD
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Tuesday, May 01 |
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00:30 |
AUD |
Interest Rate Decision |
3.75% |
4.00% |
4.25% |
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|
00:30 |
AUD |
RBA Rate Statement |
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|
10:00 |
USD |
ISM Manufacturing Index |
54.8 |
53.0 |
53.4 |
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Wednesday, May 02 |
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|
08:15 |
USD |
ADP Nonfarm Employment Change |
177K |
209K |
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|
18:45 |
NZD |
Unemployment Rate |
6.3% |
6.3% |
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Thursday, May 03 |
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|
08:30 |
USD |
Initial Jobless Claims |
380K |
388K |
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Friday, May 04 |
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|
08:30 |
USD |
Unemployment Rate |
8.2% |
8.2% |
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|
08:30 |
USD |
Nonfarm Payrolls |
170K |
120K |
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|
Thursday, May 10 |
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|
21:30 |
CNY |
Chinese CPI (MoM) |
0.2% |
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|
21:30 |
CNY |
Chinese CPI (YoY) |
3.6% |
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Wednesday, May 16 |
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|
19:50 |
JPY |
GDP (QoQ) |
-0.2% |
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Click here a current USD/CNY Chart.
Originally posted here
