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Chinese growth supports the CNY - BTMU

FXStreet (Barcelona) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ, observes the firmer tone from the CNY.

Key Quotes

"inflation pressures in China remain subdued The Chinese renminbi continues to strengthen in the near-term with the USD/CNY rate falling to support from its 200-day moving average at around the 6.1500-level, which is also where the daily fixing rate is located. The renminbi has now reversed around half of its decline recorded earlier this year."

"The renminbi is deriving support in the near-term from evidence that economic growth in China has strengthened after the slowdown in Q1 while China’s trade surplus is also re-widening hitting a record high in July. According to Bloomberg, their new monetary conditions index for China loosened in Q2 by the fastest pace since Q3 2012 providing a more supportive environment for economic growth."

"It was revealed over the weekend that inflation pressures in China continue to remain subdued which allows scope for looser policy. The annual rate of headline inflation remained at 2.3% in July."

"The release in the week ahead of the latest retail sales, industrial production and fixed asset investment reports for July will be scrutinized to assess if the economy continues to strengthen. Our analysts in Hong Kong expect the renminbi to strengthen further in the 2H 2014 towards our year end USD/CNY forecast of 6.0600."

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