CNY Devaluation Risks Highest In Decades

We have long-warned that expectations of yuan appreciation are not fundamentally supported, and back in October, we called for the yuan to be re-pegged to the US dollar as the economy slowed. We have also held a bearish stance on the non-deliverable forward market, and this view is playing out nicely. We are now growing increasingly cautious of a devaluation in the spot rate in 2012, or at least a weakening trend, should domestic and external conditions deteriorate substantially. We favour the prospects for the Indian rupee in 2012.

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