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Euro's fragile climb vs CHF; Chinese yuan weak on debt bubble

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Euro’s advance against Swiss franc is fragile

By Yann Quelenn

Although the Euro has climbed to its highest level versus CHF since January 2015, when the Swiss National Bank stopped supporting it at 1.20 francs per Euro, we believe the EU currency is sitting on a fragile perch. European Union member states are sitting on massive debt, and much of current economic growth has been fuelled by the European Central Bank’s massive injections of cash. Just look at the Greek debt problem: this suggests things won’t end well.

Still, until the ECB’s monetary policy meeting on 26 October, we think the Euro will stay strong against the franc. Demand for Euros is rising, Eurozone unemployment is fading, inflation is weak and growth is, well, growth. Most of all, investors expect that the ECB will begin to reduce its bond-buying and to announce details of that after the 26 October meeting.

Chinese yuan to keep slipping on overdebtedness worries

By Arnaud Masset

China’s need to deleverage has been under the radar in recent months, but it raised its head Friday as Standard & Poor’s cut its credit ratings for both the People’s Republic and for Hong Kong. Stock markets tumbled, as S&P said that “a prolonged period of strong credit growth has increased China's economic and financial risks."

This, coupled with the US Federal Reserve’s planned sales of bonds and the European Central Bank’s expected tapering of its bond buying, are shining a spotlight on China’s massive debt. The yuan continued to lose ground against the USD with USD/CNY climbing to 6.60, up 2.45% from its multi-month low of 6.439. We foresee further weakness.

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Source: https://en.swissquote.com/fx/news
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