Forex Flash: USD/CNY looks neutral ahead – BTMU

Bank of Tokyo Mitsubishi UFJ analysts have taken a look at USD/CNY´s prospects and are neutral for the week ahead, with a range between 6.2100-6.2500.

They note that progressively higher onshore fixings easily pulled up USD/CNY spot in the last trading week before the holidays, to break their topside range for last week. In a week ahead when USD/CNY will not trade at all onshore, it's easy to have a "neutral" outlook. They feel that official efforts have been directed towards lower short rates and higher USD/CNY, but it seems a bit like manufactured weakening. Logically a more cautious monetary policy ahead could see less injections of liquidity, but this remains to be seen. They write, “Offshore, USD/CNH still feels a bit heavy at times. The wider onshore fix and offshore spot diverge, the more interesting the prospects for future capital flows.”