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How expectations of a CNY revaluation affect JPY
How do expectations of a CNY revaluation affect JPY?
Click here for the full Note and disclosures.
We expect a downtrend in USD/CNY to
resume in 2Q, resulting in a broad rally in Asian FX.
Although there is no fundamental link between USD/CNY and
USD/JPY, there has been a modest correlation between USD/JPY
and USD/CNY NDFs.
Correlation between USD/JPY and USD/CNY NDFs suggests relevant flows of “proxy trades”.
Thus, heightening expectation for a larger degree of CNY appreciation would push USD/JPY lower accordingly. Short-term event risk: Canadian G7 meeting.
ENDS
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