Fx strategists anticipate additional revaluations of the Chinese yuan following last week's move to de-peg the currency. Last Thursday the People's Bank of China announced a move to revalue the yuan to RMB8.11 against the dollar, a 2% appreciation. Additionally, the currency is now a managed float, with the ability to move within a range of 0.3% from the previous day's closing value.
Analysts noted strong interest in non-deliverable forwards from investors positioning for further appreciation of the Chinese currency against the greenback. Popular plays were one- to three-month and also one-year positions on the currency pairing.
"It's more flexible than we expected," said Thio Chin Loo, senior currency strategist at BNP Paribas in Singapore, adding, "The peg has been abandoned, leaving some room for appreciation." With the first move out of the way, which has been the focus of market watchers this year (DW, 5/6), analysts expect more revaluations. "We anticipate an additional 5% move by the end of the year through a series of mini-steps," said Claudio Piron, regional currency strategist at JPMorgan in the Lion city. JPMorgan is forecasting RMB7.70 by December while BNP is targeting a RMB7.9 move.