How Does China'S Central Bank Want The Renminbi To Go?

Perry Kojodjojo and other Deutsche Bank analysts released a report on Tuesday (September 23rd) that the US central bank (PBOC) might sell dollars to curb the weakening of the renminbi as the dollar becomes stronger.

The report said the central bank may take

As a monetary policy tool, we use foreign capital inflows to ease shore liquidity.

Deutsche Bank noted that the market's confidence in the renminbi has improved substantially in the past few weeks, mainly due to a sharp rebound in the trade surplus, and the government is expected to take more stimulus measures to boost domestic demand.

The report recommends that investors buy a six month offshore RMB / CNH/KRW (NDF), with a target of 176 won and a 164 stop loss.

On the other hand, Daiwa Capital Markets said that the Central Bank of China recently changed the way to expand its currency, which would bring downward pressure on the RMB.

Big sum

According to a report released by Lai Zhiwen on Monday, the Central Bank of China pumped 500 billion yuan into the five state-owned banks last week to expand the basic currency by increasing the "debt to other financial institutions".

The report said that the FED reduced the quantitative easing (QE), which greatly reduced the space of the Central Bank of China to expand its balance sheet through increasing foreign exchange assets. The central bank had to find a new way to continue printing money without the support of the US dollar. As time goes on, it will naturally bring downward pressure on the RMB. The prospect of the withdrawal of QE from the US Federal Reserve and interest rate hike will further exacerbate this impact.

Lai Zhiwen said the central bank tried to maintain

The pace of expansion is not a more positive policy stance, he said. It is incorrect and misleading to interpret the above capital injection as "the sharp turning of policy" and the 50 basis points for lowering the quota.