CNY: Sticking With Stability

Since the People's Bank of China announced it would allow greater yuan flexibility back in June, allowing more two-way trade, we have seen just that. The CNY/US$ rate strengthened from CNY6.8300/US$ to CNY6.7683/US$ on the news, and in line with our view has since retreated back to CNY6.8000/US$. We continue to see a move back to our end-year target of CNY6.8300/US$ over the coming months. The 12-month non-deliverable forward is pricing in mild gains over the next year - appreciatory expectations that we see being gradually unwound.

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