Chinese yuan likely to trade in range of 6.60-6.70 in the short-term, strong resistance seen at 6.70: Scotiabank

The Chinese yuan is expected to trade in a range of 6.60-6.70 at the moment, while maintaining short CNH/JPY cross position in case of risk aversion intensifying abruptly, according to the latest research report from Scotiabank.

In addition, the United States President Donald Trump told reporters he would also consider imposing additional tariffs on USD500 billion in Chinese goods should Beijing retaliate, according to CNBC. On the rates side, the CNY ND IRS is likely to bull-steepen further as the PBoC has fine-tuned its statement on liquidity to "keep liquidity at a reasonable and ample level" from "keep liquidity at a reasonable and stable level.

A US-China trade war has moved to reality from threat. The US has slapped tariffs on USD34 billion worth of imports from China, immediately prompting China’s equivalent retaliatory tariffs on US goods.

Meanwhile, PBoC Party Chief Guo Shuqing said last Thursday in an interview with Financial News run by the central bank that the yuan exchange rate has entered a reasonable range with two-way fluctuations and a sharp depreciation in the yuan is unlikely given China’s economic fundamentals. He expects the yuan to strengthen in the future.

"We expect China and the US to finally resolve their trade dispute through dialogue before US President Donald Trump shifts his focus to the midterm election set for November 6, 2018," the report added.