Bob Savage, director of macroeconomic strategy for markets at BNY, notes a clear divergence between CNY forward and spot trading, which suggests hedges are expiring as assets flow out. CNY has outperformed peers, but the bank is questioning its role as a secure haven as cash flows point to huge emigration-related outflows. PBoC officials reiterate that they will not employ the depreciation for competitiveness purposes and strive to keep the renminbi broadly stable.

Forward force and point flows

“CNY has significantly outperformed its peers, but we also find it difficult to make a strong case for how the currency can serve as a safe haven.”

“There have been very large outflows over the last two days and this is almost certainly related to asset exports or even direct currency transactions in response to current developments.”

“However, our flows tell a different story. The last three sessions since the start of the conflict have generated the largest year-to-date forward/swap flows in CNY, with similarly strong moves prior to that.”

“Chinese Central Bank Governor Mr. Gongsheng said today that Beijing does not need or intend to use currency depreciation to enhance trade competitiveness, confirming that the renminbi will not be used as a policy tool in trade disputes.”

(This article was created with the aid of an artificial intelligence tool and has been reviewed by an editor.)