J.P.Morgan On The Lookout For Further PBoC Defence Ahead Of National Holidays

J.P.Morgan write “with a continued unfavourable interest rate differential and more resilience in the U.S. growth outlook, we think CNY depreciation pressure against USD will stay in place until significant improvement in the Chinese growth outlook is in sight.”

• “We believe the PBOC will use various approaches during this period (e.g., counter-cyclical factor in daily fixing, measures to affect CNH liquidity, macro-prudential measures, window guidance or other communications) to avoid significant depreciation and manage currency expectations.”
• “The central bank’s incentive to defend 7.30 seems strong. With room for a further upturn in USD DXY, based on our strategists’ forecast in September, and relatively lighter market liquidity into the National Holiday period (29 September - 6 October), we believe it is likely that the PBOC may perform pre-emptive defence before month-end.”