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CHINA YUAN: VIEW: Goldman Sachs note that "uncertainty around US policy re:
China generated more vol. in CNY over the past week. In his press conference
Friday, Pres. Trump announced a range of measures in response to recent Chinese
actions, including the passage of a new security law for Hong Kong at the recent
NPC. The specific policies were relatively narrow in scope, and we would not
consider the steps a meaningful escalation. However, disputes between the two
countries now cover a range of issues which seem unlikely to be resolved soon,
we exp. legislation related to the delisting of Chinese firms to become law.
Moreover, over the last month the PBOC has demonstrated some tolerance for
gradual CNY depreciation, in our view; before the last week, the CNY
countercyclical factor had been relatively small. As result, we exp. ongoing
capital outflow pressures to weigh on CNY, and are revising our USD/CNY
forecasts higher: to 7.25/7.15/7.00 for 3m/6m/12m horizons respectively, vs.
7.15/7.05/6.90 prev. At the same time, we do not exp. recent bilateral tensions
to escalate to '19 levels, with spillovers to mkts well beyond NJA FX - but this
remains a source of uncertainty for broad USD & a number of specific crosses."