HSBC writing prior to the PBOC RRR cut, see a narrower CNY yield advantage in 2021 as a key reason behind their view that USD/CNY will gradually trade higher in 2H
- A higher USD/CNY has played into our thinking that the broad USD should begin to bottom in the months ahead. After all, the CNY’s performance is a key determinant of the broad USD overall.
- Our long-standing view has focused on the actual start of the Federal Reserve’s (Fed) tapering being supportive for the USD, especially those major central banks that could be expanding their balance sheets in contrast to the Fed or are having monetary policy shifting in a different direction.
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