USD/CNY Weekly Fundamental Analysis – February 8-12, 2016 -Forecast

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Published: Feb 6, 2016, 06:06 UTC

Weekly Analysis and Recommendation: The USD/CNY will enter the holiday week at 6.5739 trading virtually flat after ups and downs all week. The CNY ended

USD/CNY Weekly Fundamental Analysis – February 8-12, 2016 -Forecast

Weekly Analysis and Recommendation:

The USD/CNY will enter the holiday week at 6.5739 trading virtually flat after ups and downs all week. The CNY ended the week up 0.03%. The PBoC injected CNY 80bn and CNY 70bn into the banking system through 14-day and 28-day reverse repos respectively on Thursday, bringing total net liquidity injection to CNY 200bn week-to-date to ensure onshore yuan liquidity.

The SAFE announced on Thursday that it will ease restrictions on both capital inflow and outflow for QFII funds. China’s FX regulator will calculate an initial QFII quota between USD 20mn and USD 5bn for any financial institution based on its assets under management. Additional quota could be applied as well. In addition, the SAFE will further facilitate QFII funds moving funds in and out of the mainland, while shortening lock-up periods for capital of QFII funds to three months from one year.

Phoenix New Media cited PBoC research bureau head Lu Lei reporting that the Chinese yuan rate will be “most significant” to the nation’s economy in 2016. He also said that a stable yuan rate will help solve other issues more easily and the government is “more willing” to talk about yuan rate versus a currency basket.

On Monday, the CFETS said that “RMB exchange rate will continue referring to a basket of currencies and enhancing its flexibility”, while pledging to maintain the yuan’s stability against a currency basket. We think the PBoC will seek a balance between stability and flexibility. Mathematically, more flexible USD/CNY fixing could enhance CFETS RMB Index’s stability and vice versa. In the coming future, we expect the PBoC to maintain CFETS RMB Index relatively steady around 100 level, while depegging onshore USD/CNY fixing to modestly increase the daily reference rate’s flexibility.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports, which cover the current week and are published by Sunday before the new week begins. Daily as the markets close we share any new events, forecasts or analysis that affect the current day. To achieve a full accurate understanding it is important that you study all of our data and analysis as a whole. Please click on the links to find the most recent reports for this asset.

Major Economic Events for the week:


Date	Currency		Forecast
Feb 7	JPY	Current Account	1.59T
Feb 8	CAD	Building Permits m/m
	USD	Mortgage Delinquencies
Feb 9	AUD	NAB Business Confidence
	GBP	Trade Balance	-10.4B
	USD	JOLTS Job Openings	5.54M
	AUD	Westpac Consumer Sentiment
Feb 10	GBP	Manufacturing Production m/m	0.0%
Feb 11	CAD	NHPI m/m	0.3%
	USD	Unemployment Claims	287K
Feb 12	AUD	Home Loans m/m	2.9%
	EUR	German Prelim GDP q/q	0.3%
	EUR	Flash GDP q/q	0.3%
	USD	Core Retail Sales m/m	0.0%
	USD	Retail Sales m/m	0.1%
	USD	Import Prices m/m	-1.4%
	USD	UoM Consumer Sentiment	92.6
Feb 13