HSBC highlight two continuing headwinds that’ll drive the Chinese yuan even lower

HSBC say that CNY could face more headwinds from

  • China’s persistent run of weak data
  • and further widened yield disadvantage

And that People’s Bank of China efforts to prop up the yuan are half-hearted:

  • The PBoC may continue to smooth volatility, but we do not expect it to draw a firm line in the sand when the tide keeps coming in.

Also on the PBOC, the path is clear for rate cuts next Monday:

  • The PBoC unexpectedly lowered the rate on its one-year loans, or medium-term lending facility (MLF), by 15 bps to 2.5%, together with a reduction of 10 bps in its 7-day reverse repurchase rate (a short-term policy rate) to 1.8%.
  • The rate cut opens room for a reduction in 1-year or even 5-year loan prime rates on 21 August.

ICYMI on the MLF cut:

For today, still to come:

Offshore yuan update:

This article was written by Eamonn Sheridan at Source