Goldman Sachs views the recent increase in the reserve requirement in China as a symbolic measure and recommends short positions on USD/CNH under certain conditions.
Goldman Sachs stated that the recent two percent increase in the reserve requirement for foreign currency deposits in China creates opportunities for opening short positions on the USD/CNH pair.
The bank views this measure as a symbolic policy step aimed at slowing the pace of yuan strengthening in recent months. Analysts recommend entering short positions when the gap between the spot rate and the official fixing narrows to two hundred to three hundred basis points, provided there are no serious external shocks, such as an escalation of tensions in the Middle East.
Goldman Sachs expects that the strengthening of the yuan by January will outpace the pace embedded in forward contracts. This will be facilitated by seasonal factors and upcoming summits of world leaders. In years of yuan strengthening, the seasonal increase in repatriation of foreign currency earnings by exporters in December usually exceeds average indicators.
According to the bank's estimates, the volume of additional repatriation in December of this year will amount to at least seventy billion dollars. This influx of funds, according to Goldman Sachs forecasts, will lead to a decline in the USD/CNH pair to the level of 6.55-6.57 by the end of January.
The bank continues to recommend three-month binary put options on USD/CNH targeting the rate's movement into the 6.55-6.57 range.