CNY: A year for red packets
We expect 2018 to be a strong year for the yuan albeit not quite as strong as 2017. Here are three reasons why we support a strong yuan view and expect around 3% appreciation of CNY against the USD
Executive summary
- Having taken back control of the Renminbi in 2017, we expect the People's Bank of China to be comfortable with USD/CNY edging down to 6.30 through-out 2018
- Modest CNY appreciation allows China to: (1) encourage modest capital inflows; (2) protect USD debt exposure of corporates; and (3) suit more balanced economy
- We are not looking for any significant changes to the FX regime in 2018 and see less deviation between CNY and CNH
This report is part of our 2018 FX outlook published December 2017
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