More China policy easing to follow today’s yuan devaluation - HSBC

BEIJING – The abrupt decision today by the people’s Bank of China to effectively devalue the yuan by 1.9% in terms of the onshore USD-CNY fixing rate  has injected considerable volatility into the RMB and other Asian currencies. But HSBC says it is important that the change in the fixing mechanism is not be read as a sign that China's authorities are purposely adopting a CNY devaluation strategy.

“In our view (China) has sufficient policy ammunition to boost domestic demand to offset external headwinds.” HSBC says. “We forecast another 25bps policy rate cut and 200bps reserve ratio cut in 2H 2015. Today's change in the USD-CNY fixing mechanism will not impede RMB internationalisation efforts.” www.hsbc.com (ATI).