Kit Juckes, Research Analyst at Societe Generale, suggests that the Chinese FX data posted a further modest gain in April, driven by valuation gains as the Euro rallied.
“Trade data posted sluggish import and export data but everyone’s eyes are drawn to the huge jump in imports from Hong Kong that suggests on-going capital flight. As the dollar’s correction runs out of steam and valuations effects stop boosting FX reserves, so concern will increase again. Likewise, when the current bout of policy support for growth fades, concern about the gradual economic slowdown will return too. None of this is imminent, but it’s inevitable all the same.”