Selling pressure on RMB to die down after FOMC meeting

It’s been under some stress lately.

It has been noted that outflows from emerging market (EM) funds returned following the ECB’s lackluster easing measures.

According to a research note from CCB International, the net outflow from Chinese equity funds for 3-9 Dec widened to US$587m, while EM equity funds, excluding China, recorded outflows of US$836m.

The report expects the outflows from EM to abate after the FOMC meetings which happened from 15 to 16 December.

Here’s more from CCB International:

The renminbi has been under significant selling pressure as the market holds its breath for the first Fed rate hike in years, likely announced on 16 Dec.

However, we expect some pullback in the renminbi after the FOMC meets. We expect investors to cover their short positions in the currency while the PBoC intervenes to guide two-way volatility in the US$/CNY.

Our Short-term Trend Index has been on a meaningful sell signal since 26 Nov. Near-term market risk remains high. That said, we think the present weakness will become a buying opportunity, especially if the market sells off into the FOMC announcement.