FXStreet (Edinburgh) – According to Eric Theoret, Currency Strategist at Scotiabank, the recent moves by the PBoC could pose a threat to a potential rate hike by the Fed in September.
Key Quotes
“The PBOC has pushed up its USDCNY fixing rate for a second consecutive session, driving USDCNY to fresh multi-year highs (CNY lows)”.
“The two-session move has generated broad turbulence across currencies and asset markets, providing for considerable weakness across a range of EM currencies as well as growth-sensitive commodity currencies AUD, NZD, CAD and NOK”.
“The apparent defensive CNY intervention has since weighed on the USD, presenting a key risk from a flow perspective while adding to fundamental concerns about the timing and extent of Fed policy normalization in light of risks to global growth and inflation”.
“We note that the 1.6% rise in the fixing rate has not been matched in USDCNY, the apparent defensive intervention helping to limit the rise in USDCNY to 1.0%. As such, CNY has been pushed closer to the mid-point of the 2% trading band around which it trades relative to the PBOC fixing rate”.
(Market News Provided by FXstreet)