BNY’s Head of Markets Macro Strategy Bob Savage notes a sharp divergence between CNY forwards and spot, suggesting hedge unwinding alongside asset outflows. CNY has outperformed peers, yet the bank questions its safe haven role as spot flows show large outflows tied to expatriation. PBoC officials reiterate they will not use depreciation for competitiveness and aim to keep the renminbi broadly stable.

Forward strength versus spot outflows

“CNY has strongly outperformed its peers, but we also struggle to see a strong case for how the currency can serve as a safe haven.”

“The past two days have seen very large outflows, and this almost certainly relates to asset expatriation, or even outright currency transactions in reaction to current developments.”

“However, our flows tell a different story. The past three sessions since the conflict began have generated the largest CNY forward/swap flows YTD, extending similarly strong moves before that.”

“China’s central bank governor Pan Gongsheng said today that Beijing neither needs nor intends to use currency depreciation to gain trade competitiveness, reaffirming that the renminbi will not be deployed as a policy tool in trade disputes.”

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