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23 May 2013
Flash: PBOC resumes CNY appreciation -BBH
FXstreet.com (Barcelona) - Brown Brothers Harriman analysts note that it seems that last week’s apparent shift in FX policy was a head fake.
They see that after several higher fixes that broke the steady trend of lower USD/CNY fixes, the PBOC reversed course this week and set a record low fix near 6.19 on Wednesday. They feel that thus, the near-term outlook for the exchange rate remains unclear and the economic outlook has also gotten worse. They write, “After the weaker than expected China HSBC PMI reported at 49.6, markets will be looking for a weak official PMI reading for May too when it is reported June 1. We think signs are pointing for China growth slowing eventually to the low 7s, which is perhaps a worse outcome than markets are pricing in currently. The lack of a significant policy response to this latest slowdown is noteworthy. “
They see that after several higher fixes that broke the steady trend of lower USD/CNY fixes, the PBOC reversed course this week and set a record low fix near 6.19 on Wednesday. They feel that thus, the near-term outlook for the exchange rate remains unclear and the economic outlook has also gotten worse. They write, “After the weaker than expected China HSBC PMI reported at 49.6, markets will be looking for a weak official PMI reading for May too when it is reported June 1. We think signs are pointing for China growth slowing eventually to the low 7s, which is perhaps a worse outcome than markets are pricing in currently. The lack of a significant policy response to this latest slowdown is noteworthy. “