CNY: Debt issue resolution will have a huge impact on the currency - Rabobank

Research Team at Rabobank, notes that yesterday saw CNY and CNH continue to drift lower, with the latter slipping to the weakest since September 2010.

Key Quotes

“Despite that fact, a PBOC spokesman this morning helpfully stated that "there is no basis for continuous depreciation." Will that jaw-bone work? Notably, Chinese 10-year government bond yields hit a record low even as the currency was slipping, which doesn't look like a mass sell-off, but also doesn't suggest that there are any economic gains being seen from the 4%-ish slide this year so far.

Also note that local governments are now being allowed to set up more than one asset management company to deal with provincial debt. Resolution of the debt issue is needed: but how this is going to be done will also have a huge impact on the currency.”