Huge potential for more Chinese intervention – DB

FXStreet (Guatemala) – Head of European FX and cross-market strategy at Deutsche Bank, George Saravelos argued the reason that global markets have reacted so violently to Chinese developments was what was happening with reserve holdings.

Key Quotes:

“The recent shift in FX policy has prompted a big revising of RMB expectations towards further weakness and correspondingly capital outflows. In response the PBoC has been selling FX reserves to defend the renminbi, selling foreign assets in the process.

This was analogous to an unwind of QE on a global scale. Saravelos argued the potential for more China outflows is huge, with non-sticky Chinese liabilities like deposits, equity and debt inflows worth USD 2 trillion of China’s 3.6tr reserves. Aggressive easing from the Chinese authorities, or from elsewhere in the world, was needed for sentiment to turn around.”

Head of European FX and cross-market strategy at Deutsche Bank, George Saravelos, argued the reason that global markets have reacted so violently to Chinese developments was what was happening with reserve holdings.

(Market News Provided by FXstreet)