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21 Feb 2014
Flash: USD/CNY NDF & USD/CNH Fwd spread to narrow further - ANZ
FXStreet (Barcelona) - Irene Chung, FX Strategist at ANZ Research notes that the USD/CNY NDF & USD/CNH fwd spread looks set to narrow further.
Key Quotes
“Our spread trade recommendation (selling 1m USD/CNY NDF and buying 1m USD/CNH forward), which we rolled on 14 February (at 599 pips), is now trading close to our target of 300 pips.”
“We expect the spread to narrow further, as USD/CNH continues to retrace upward on the back of unwinding of short positions.”
“We note that in the last major retracement in mid-2012, the spread turned negative to as much as -500 pips.”
“We think the unwinding of positions may have more to go. We move our target for the spread to flat from 300 pips currently, and the stop loss to 500 pips from 800 pips.”
“We await the current retracement to run its course before initiating a short USD/CNH position as we expect the pair to eventually resume a downtrend.”
Key Quotes
“Our spread trade recommendation (selling 1m USD/CNY NDF and buying 1m USD/CNH forward), which we rolled on 14 February (at 599 pips), is now trading close to our target of 300 pips.”
“We expect the spread to narrow further, as USD/CNH continues to retrace upward on the back of unwinding of short positions.”
“We note that in the last major retracement in mid-2012, the spread turned negative to as much as -500 pips.”
“We think the unwinding of positions may have more to go. We move our target for the spread to flat from 300 pips currently, and the stop loss to 500 pips from 800 pips.”
“We await the current retracement to run its course before initiating a short USD/CNH position as we expect the pair to eventually resume a downtrend.”