Rabobank analysts note that the US Treasury has just declined to declare China a currency manipulator in its semi-annual foreign exchange report – but it has made clear it wants a stronger CNY prompted by Chinese economic reforms, which is not going to happen.
Key Quotes
“We are seeing further PBOC warnings of just how stable CNY is and how painful shorting it will be ahead, which is entirely unrelated to any fears of the opposite, honest.”
“Furthermore, lots of other countries are now on the US Treasury watch-list with China: Korea, where the KRW is in trouble; Japan, which is a nice surprise for PM Abe; and Singapore and Malaysia. However, India and Vietnam are no longer trouble-makers, which makes geo-strategic sense at least.”
“Yet outside Asia we see Ireland, Italy, and Germany are all there as one of the key criteria for being on the watch-list has been changed to a current-account surplus of over 2% of GDP, down from 3%.”
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