Chinese market volatility and US CPI will dominate FX – DBS

Chinese shares are experiencing high volatility as markets oscillate between anticipation and disappointment over China’s fiscal support, notes Philip Wee, currency analyst at DBS.

The RMB swung amid capital fluctuations

“The CSI300 fell 7% yesterday after a meeting of the National Development and Reform Commission ( ) did not provide details on fiscal spending. However, the boost in sentiment from the many policy announcements in September should not be discounted, and Chinese shares are still over 20% higher despite yesterday’s losses.”

“Finance Minister Lan will hold a fiscal policy briefing on Saturday, and Chinese market volatility may continue for now. USD/CNH rebounded to 7.09 amid equity volatility, which is not surprising given the $9 billion inflows into US-listed Chinese equity ETFs on hopes of the effectiveness of Chinese stimulus.”

“We expect RMB gains from policy stimulus to be gradual given a still fragile economic outlook and high uncertainty around foreign trade and tariffs. Last Friday, the EU voted to formally adopt tariffs on electric vehicle imports from China, and China also announced anti-dumping measures on EU cognac in response.”