Stronger RMB to stay strong into end-2015: HSBC

HONG KONG - The RMB's strong performance has caught the market's attention - since early June, the RMB has been a top performer against both major currencies struggling with low inflation and low yields and against most EM currencies, HSBC says in a research report.

In our view, the following key factors have led to this reversal in the RMB's fortunes - FX policy turning more tolerant of RMB appreciation; A shift in the flow structure away from 'hot money' inflows; Prudent monetary policy, and; A strong reform agenda’

“We expect these factors to remain in place in the coming months, which suggests that the RMB should remain broadly strong into the end of the year,” HSBS says.

“While official intervention is on the sidelines for now and RMB strength could overshoot, we cannot lose sight of China's FX policy having a goal of inducing greater two-way flexibility for the RMB. We still expect this to emerge, which could also coincide with greater fixing volatility ahead.”  www.hsbc.com (ATI).