“It has been a tortuous start to the year on the offshore yuan trading desk as funding conditions continue to wrong foot market participants,” said Stephen Innes, senior trader at Oanda in the latest report.
“Despite some semblance of order emerging, we should expect volatility to remain high.”
Innes also expects the underlying yuan depreciation pressures to return, “because the fundamental reasons that are driving depreciation, such as capital outflows and concerns on Trump’s China policies, haven’t changed”.
“Although the offshore yuan moves have put traders on edge, the global impact is not in the same league as the turmoil created last year,” added Innes.
“Moreover, as history so often repeats itself in the forex world, we should expect the yuan to resume its course of depreciation post Trump’s inauguration and at the latest past the Lunar New Year.”
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