China’s quest for a fairer economy darkens yuan outlook
The offshore yuan’s meltdown on Tuesday, triggered by Beijing’s aggressive takedown of profit-driven education businesses and tech monopolies – partly for unfair worker treatment , portends more CNH weakness ahead.
Private equity firms exposed to education-related investments are scrambling for the exit , while confusion over China’s tech crackdown has other investors similarly flustered and fleeing . Shanghai stocks fell as much as 2.0% early Wednesday, building on a 4.8% drop since Friday, though the yuan is recouping before a likely dovish FOMC outcome.
Meanwhile, long-simmering concerns over indebted real estate developer Evergrande may be coming to a boil, after S&P cut its credit rating by two notches, deepening anxiety for China-focused funds .
The IMF on Tuesday issued a revised outlook for the global economy, upgrading its forecast for rich nations, but downgradingChina due to reduced state spending and fiscal support .
USD/CNH vaulted the 200-day moving average hurdle at 6.4998 on Tuesday, the bullish cue reinforced by the Fibonnaci retracement line at 6.4978. The base of the daily Bollinger uptrend channel coincides with the latter, encouraging dollar bulls towards the next psychological barrier at 6.5500.
Wednesday’s USD/CNY fixing, close to forecasts, implies there’s no urgency to buffer the yuan against weakness yet.
Source: Reuters (Reporting by Ewen Chew; Editing by Sonali Desai)