Yuan Looks To Trump-Xi Meeting, New Yuan Loans

Fundamental Forecast for CNH: Neutral

The Chinese Yuan in both onshore (CNY) and offshore (CNH) outperformed eight G10 currencies this week, only losing to the New Zealand Dollar and Canadian Dollar. China’s October PMI prints indicate that the manufacturing sector has maintained stable expansion during the month. Looking forward, market focus is turning to world’s top leaders: U.S. President Trump will visit China for three days; the Chinese President Xi Jinping will meet him and then attend the APEC summit. In addition, China’s economic calendar is dotted with key events, including exports and imports, Consumer Price Index (CPI) and New Yuan loans.

Discussions on trade practices between China and the U.S. have already heated up ahead of Trump’s trip. As we discussed earlier, increased trade disputes could hurt China more than the U.S. and then drag down the Yuan rate. On Wednesday, Trump called US’s trade deficit with China “embarrassing” in a press conference. In terms of trade issues, China has showed a more positive attitude. The spokeswoman of China Foreign Ministry Wang Chunying responded to Trump’s remarks and reiterated that China targeted at a win-win status with trade partners and would like to solve disagreements through talks and negotiations.

This is not the only disagreement between the two countries. A week ago, the U.S. Department of Commerce announced it would maintain China’s status as a non-market economy. In response, China’s Commerce Department claimed that “the conclusion was a distortion of the real situation”. The two countries also have different opinions on U.S. import tax on some China’s products. Next week, China will release the October prints for exports and imports. Besides the significance of the gauges themselves, they could become evidence used in trade talks between the two parties.