Barclays on their CNY outlook for the coming new year

  • USDCNY is likely to register a flat prfile around 6.60 over much of our forecast horizon
  • But the CNY is likely to strengthen as the USD weakens broadly into H2 2018
  • Chinas exchange rate policy larks clarity even after the 19th Party Congress, as questions about policy continuity at the PBOC remain
  • China likely warts to maintain a stable a stile currency in both spot atnd NEER terms to placate the US in trade discussions and to limit capital outflows
  • A gradual easng of capital contras is likely, suggesting limited FX pressure in the near term
  • We recommend a short USDCNH carry trade