According to Frances Cheung, Research Analyst at Westpac, the latest China RRR cut, effective 15 October, was not a surprise but the amount of liquidity injected (after offsetting MLF) was slightly bigger than expected.
“Furthermore, the risk is for more easing to come, if the authorities judge that more support to growth is needed. While interest rate differentials may not be the most important factor driving USD/CNY, as it gets more unfavourable for the CNY it nevertheless is adding marginal upward pressure on USD/CNY.”
“The dollar may stay strong, supported by higher yields. The next resistance for the pair remains at the Jan 2017 high of 6.96.”
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