Goldman: Renewed Depreciation Pressures Amid USD Strength & Positive Carry

Goldman Sachs note that “the CNY depreciated against the USD in January, despite some oscillations amidst different announcements of policy support. The DXY rose notably from the late December lows, primarily on solid employment reports and hawkish comments from Fed officials. CNY shorts built up in January on attractive carry returns.”

• “As policymakers actively managed the currency, investors have expressed growing interest in 1) carry trades of CNY shorts against high yielders such as INR, and 2) trade ideas related to active currency management (also attractive carry profiles), such as CNH/CNY basis wideners, pay CNH CCS vs. NDIRS, and pay USD/CNH forward points.”