CNY likely to remain relatively steady against basket of currencies in the near-term, says Scotiabank

The CNY is expected to remain relatively steady against a basket of currencies and trade in a catch-up mode from time to time, with the CFETS RMB Index stabilizing at around the 93 mark for now.

Over the remainder of the year, it is believed that the nation will manage to avert any intense market worries over the yuan’s depreciation before the 19th Party Congress in the autumn, avoid engineering the yuan weaker and refrain from competitive currency devaluation and prevent the yuan from appreciating excessively to drag down the nation's economic growth, Scotiabank reported.

As the market could remain in doubt about the yuan’s strength, the fixing-spot gap that inverted yesterday following the dollar selloff could return to positive territory and widen again. Meanwhile, historic data suggest the gap remaining above +100 pips for several consecutive sessions will herald looming sharp corrections in the yuan exchange rate.

"We stay cautious in the foreseeable future as the pattern is expected to continue," the report said.