The trend of RMB appreciation has not changed, and the short-term pace has slowed down. It is better to go long CNH/INR (Barclays)
The Barclays report pointed out that the appreciation of the RMB has stalled, but the medium-term outlook has not changed.
The Barclays report pointed out that the appreciation of the RMB has stalled, but the medium-term outlook has not changed. The central bank continues to guide the slowdown in the pace of appreciation. The high trade-weighted index, the slowdown in foreign exchange settlement by exporters and the weakening onshore sentiment have jointly restricted further strengthening. However, continued external surplus, capital outflow control measures and relatively healthy exports still provide fundamental support for the RMB. The agency maintains its forecast for the USD/CNY target level of 6.65 (slightly stronger than the forward implied level). One sentence conclusion: The long-term logic of RMB appreciation still holds, but the pace of short-term appreciation is delayed by the central bank and external factors. Investors can consider a long CNH/INR strategy to capture opportunities for gradual appreciation. Good/bad: Good for RMB assets, but the slowdown in short-term appreciation may inhibit the rapid rise of related sectors. The current market expectations may have partially reached the 6.65 target, but the timing is uncertain. Catalysts: 1) China’s central bank’s monetary policy signal; 2) US dollar index trend; 3) China’s export data and changes in trade surplus.