3 Jul 2013
Flash: Stay long USD vs CNH - JP Morgan
FXstreet.com (Barcelona) - After a steady rise over the past tradin days, the USD/CNH corrected sharply lower last Friday on market talk of a potential CNY band-widening, as noted by Paul Meggyesi, FX Strategist at JP Morgan Securities.
Meggyesi is in disagreement with the latest kneejerk market response, saying that "if the authorities do widen the band the intention will be to signal increased flexibility in the currency, not to increase the scope for the currency to appreciate."
Meggyesi adds that, in any case, "the signal from the recent pattern of fixings is that the idiosyncratic bias in USD/CNY lower is over, and from here on in the fixings should drift higher, or at least more closely track the DXY." The JP Morgan Strategist recommends to stay long USD/CNH 12m "on weaker inflows going forward, further position reduction, and on some catch-up with the rest of USD/Asia."
Meggyesi is in disagreement with the latest kneejerk market response, saying that "if the authorities do widen the band the intention will be to signal increased flexibility in the currency, not to increase the scope for the currency to appreciate."
Meggyesi adds that, in any case, "the signal from the recent pattern of fixings is that the idiosyncratic bias in USD/CNY lower is over, and from here on in the fixings should drift higher, or at least more closely track the DXY." The JP Morgan Strategist recommends to stay long USD/CNH 12m "on weaker inflows going forward, further position reduction, and on some catch-up with the rest of USD/Asia."