Halister News

(Bloomberg) -- Yuan will continue gradual decline vs USD and trade-weighted basket, with USD/CNY likely at 6.90 by June, according to Deutsche Asset Management’s chief investment officer Sean Taylor.

• Taylor told media in HK he sees dollar strength into middle of 2017, while Fed may raise rates twice by end 1Q; says BOJ is unlikely to unload new stimulus package now; likes EM Asia bonds and gold
• Concerns about one-time yuan devaluation have eased and market is no longer panicking when the currency weakens because investors have accepted depreciation
  • China needs a weaker currency to be more competitive; also needs to be stable to support President Xi’s reforms
  • Sharp devaluation wouldn’t help exports much; they are sluggish due to weak global demand
  • NOTE: USD/CNY down 0.04% at 6.6770
• China 2016 GDP growth target revised to 6.3% from 6% after stronger-than-expected growth in 1H
• Fed likely to hike once around yr-end and once more in 1Q; has refrained so far because of volatile external environment
• USD strength to continue through mid-2017
• Prefers EM Asia bonds over DM due to higher yields, especially in Indonesia, India and Australia
  • Global investors will look to increase EM bond exposure as their positions are limited
• Japan should stick with fiscal stimulus near term and hold monetary package for later given uncertainties such as the U.S. election and Italian banking troubles
  • USD/JPY at 108 by June 2017
• Good to have some gold in portfolio to hedge political risk; target $1,390 per ounce by June 2017; now at $1,320