CNY driving Asian FX higher amid trade talks - TDS

Mitul Kotecha, senior emerging markets strategist at TD Securities, points out that the CNY has strengthened to 6m highs with much of its gains are not simply attributable to USD weakness, with the currency outperforming trading partners.

Key Quotes

“China is likely maintaining a firm currency stance during trade talks with the US this week, suggesting firm CNY fixings over coming days. CNY likely to see renewed weakness by end Q2 19.”

“While a deal of sorts is probable and both sides likely to claim victory, structural issues will be much harder to resolve, suggesting that US/China tensions will remain.”

“CNY appreciation has pushed Asia's trade orientated currencies higher, but gains are unlikely to be sustained in the wake of intensifying trade pressures and renewed CNY weakness.”

“After trade talks we suggest fading strength in KRW, TWD, SGD and THB and rotating to high yielders including IDR, INR, & PHP.”