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CNY: Trade report reignites the slow growth worries for China – MUFG

FXStreet (Delhi) – Lee Hardman, Currency Analyst at MUFG, notes that the Japanese currency has strengthened modestly in the Asian trading session following the release of the latest trade report from China which has added to concerns over slowing economic growth.

Key Quotes

“The report has also weighed on commodity and emerging market currencies overnight taking momentum out of their recent strong rebounds. While their recent rebounds have been impressive, we remain sceptical over the sustainability of the gains with the bulk of the rebound likely already complete.”

“The latest trade report from China highlighted that the outlook for growth in commodity and emerging market countries remains challenged in the near-term. It was revealed that import growth in China declined more sharply than expected by an annual rate of 17.7% in September.”

“Weakness in domestic demand will reinforce expectations that the Chinese authorities will need to provide more stimulus to support growth thereby reinforcing renminbi devaluation expectations. We continue to expect the renminbi to come back under downward pressure heading into year-end lifting USD/CNY towards the 6.4500-level alongside renewed weakness in other Asian currencies.”

“The latest report also revealed that China posted a record current account surplus in September which is offering more support for the renminbi. The trade surplus widened to CNY376.2 billion in September lifting the cumulative total over the last year to just over 5% of GDP. The widening trade surplus will help to dampen the economic slowdown in China.”

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