CNY: PBoC reintroduced a counter-cyclical factor - TDS

China's central bank, PBoC reintroduced a counter-cyclical factor earlier this month in determining the CNY daily fixing, according to an announcement on its website this weekend, notes the research team at TD Securities.

Key Quotes

“We think it will provide for more stability in the CNY over the near term, in conjunction with other recent measures, limiting the need to expend FX reserves.”

“Asian currencies are likely to benefit in the short term, with SGD, INR, KRW and IDR the most sensitive to CNY gyrations in recent months.”

“Further out, we still think that the CNY and many Asian currencies remain vulnerable to a deteriorating trade outlook, especially the likes of KRW, TWD and SGD.”