17 Aug 2015
Chinese Yuan remains in the spotlight – Societe Generale
FXStreet (Edinburgh) - Strategist Kit Juckes at Societe Generale assessed the scenario post-PBoC moves last week.
Key Quotes
“The PBOC’s ‘devaluation that really wasn’t’ continues to attract the majority of headlines”.
“I wonder if the legacy of this regime shift will be felt for longer outside of currency markets and outside of China”.
“The FX adjustment is too small to make any difference to China, but the signal of reluctance to see a further unwarranted (real) appreciation, and the refusal to spend huge amounts of FX reserves countering capital outflows just to prevent the currency from adjusting, send two clear messages”.
“Firstly, that China’s economy is weak enough that a gesture was made, even if from a competitiveness standpoint it is a futile one, as well as being counter to the central direction of macro policy, which is to encourage a shift from export and investment-led growth to consumption-led growth”.
“The second is that China won’t (or can’t) continue to import disinflation through its currency policy”.
“Low imported inflation is a desirable state of affairs in a country that is promoting consumption and seeing strong real wage growth, but with disinflation, you can have too much of a good thing”.
Key Quotes
“The PBOC’s ‘devaluation that really wasn’t’ continues to attract the majority of headlines”.
“I wonder if the legacy of this regime shift will be felt for longer outside of currency markets and outside of China”.
“The FX adjustment is too small to make any difference to China, but the signal of reluctance to see a further unwarranted (real) appreciation, and the refusal to spend huge amounts of FX reserves countering capital outflows just to prevent the currency from adjusting, send two clear messages”.
“Firstly, that China’s economy is weak enough that a gesture was made, even if from a competitiveness standpoint it is a futile one, as well as being counter to the central direction of macro policy, which is to encourage a shift from export and investment-led growth to consumption-led growth”.
“The second is that China won’t (or can’t) continue to import disinflation through its currency policy”.
“Low imported inflation is a desirable state of affairs in a country that is promoting consumption and seeing strong real wage growth, but with disinflation, you can have too much of a good thing”.