Trade Strategy: Short USD/CNY, strong trade surplus and DeepSeek 2.0 may provide strong catalyst (Nomura)
Nomura Securities proposed a new trading strategy: short USD/Offshore RMB (USD/CNH), with a target of 6.55 and a time window of the end of October.
Nomura Securities proposed a new trading strategy: short USD/Offshore RMB (USD/CNH), with a target of 6.55 and a time window of the end of October. The logic behind this is China’s strong trade surplus and the potential capital inflows that could come from the release of the DeepSeek 2.0 model. The high trade surplus provides solid valuation support for the RMB, and if DeepSeek 2.0 is successfully released, it will attract global capital to re-evaluate China's AI assets, thus promoting the appreciation of the RMB. The market's general view on the RMB is "weak", but Nomura believes that the structural trade surplus and the capital inflows that may be brought about by the AI narrative will constitute a catalyst for the periodic strengthening of the RMB, which is significantly different from the market consensus. One-sentence conclusion: The current market pessimism about the RMB may be overdone. The strong trade surplus and potential AI catalysts will push the RMB to strengthen in the coming months. It is highlights to short USD/CNH. Good/bad: Good for the RMB exchange rate, short USD/CNH trading strategy. Catalysts: 1) Whether the DeepSeek 2.0 model is officially released and its market response; 2) China’s trade surplus data in June and subsequent months; 3) The central parity rate of the Chinese central bank on the RMB exchange rate.