CNY: Balanced Risks Point To Stability

Despite the recent gains in Asia FX, we doubt that the Chinese government is in any rush to revalue the yuan. As we continue to highlight, exports remain the missing link in China's economic recovery (down 23.4% y-o-y August despite the m-o-m recovery), and until we see more substantial evidence of improvement on this front, the peg is going nowhere, in our view. Our position was supported by recent comments by Chinese central bank Governor Zhou Xiaochuan, who stressed on September 23 that currency stability was the most important goal of monetary policy, which would remain 'moderately loose'.

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