We believe the risks of a re-acceleration in CPI inflation in Q2 12 can not be ignored.
In the interim, we maintain our view of one reserve requirement ratio (rrr) cut by end-January and an additional 2 rrr cuts in H1 12.
Our end-2012 USDCNY and USDCNH forecasts are maintained at 6.1 and 5.97, respectively. We are much more optimistic on CNY and CNH relative to market expectations.
December 2011 CPI inflation printed 4.1% versus Bloomberg consensus expectations of 4% and November 4.2%
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Skandinaviska Enskilda Banken AB