Jane Foley, Senior FX Strategist at Rabobank, joined Tip Tv to speak on the Chinese Yuan devaluation, Asia FX and USD, and the US rate hike scenario.
Downward pressure on the Renmimbi
Foley speaks on the Chinese devaluation of the Yuan, mentioning that the effective exchange rate is seen strengthening. Looking at fundamentals, she says how Chinese PPI has remained below zero on a year on year basis and the country is still seeing disinflationary pressure, and further believes that we could see a downward pressure on the Renminbi.
Foley notes that the PBoC is intervening in the FX market to keep the Chinese currency off from its weakest levels. While the central bank says that there is no reason for the Renminbi to be lower, markets feel otherwise.
Asia FX war will give a lift to USD
Foley believes that if there is a currency war ahead in the Asian region, the Asian central banks will try to weaken their currencies which would automatically lift the dollar, but give credence for the Fed to wait to hike rates.
US running out of jobs
With US nonfarm payrolls printing a 200K figure for some time, concerns are rising whether there are enough jobs left in the economy. Foley says how the Fed remains data dependent, and today’s US retail sales number, the NFP ahead and the productivity data ahead will play key factors for the rate hike. Foley signs off by saying that the rate hike is coming in the US, but the timing is uncertain.