SLJ's thoughts 0615

Morgan 的任先生的想法是很多投資銀行交易員時常參考的，而且他比較不像其它的分析師那樣變來變去，或是死數字派！

個人認為也是他的個人view 是值得一讀的！

Here are my thoughts on USD/CNY:







1. This is an explicit decision by Beijing to guide USD/CNY lower. While at this point, I don't know, for sure, the precise reasons behind this latest move, we should know that it is an explicit decision made by Beijing to guide CNY stronger, even against a strong USD, i.e., against the trend in the regional currencies.







2. Trade surplus, M2 growth, and inflation. The trends in these three variables are moving in the wrong direction. Far from stabilising, the more Beijing has resisted a stronger CNY, the more severe these other problems have become. I suspect letting USD/CNY trade lower is related to the recent data. China's new policy focus on consumption will take quarters/years to play out. Time is running out.







3. Mr. Paulson's connection. Another reason could be Beijing's great relationship with in-coming US Treasury Secretary Paulson. The announcement by the PBOC immediately following the White House's nomination of Mr Paulson could have been a signal from Beijing to Mr Paulson that there will be greater cooperation on the issue of the CNY.







4. Beijing's inexplicable recalcitrance between April 12 and now. I have personally been puzzled by Beijing's behaviour since President Hu's visit to the US on April 12. The decision to hold USD/CNY above 8.00 (with the exception of an eight hour period on May 15) cannot be easily explained. Beijing's recalcitrance is not a sensible policy for the long-haul; something had to change.







Bottom line: USD/CNY has to drift lower. Though the timing of the latest move was unpredictable, for those who don't have insiders' information, the direction of the move is logical.