Analysts at ING note that there are reports emerging over recent days suggest that the US and China will somehow try to incorporate a soft commitment to stability in the renminbi into a Memorandum of Understanding (MoU) on trade relations.

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“This MoU looks to be part of the preparatory work before a meeting between Presidents Trump and Xi in March in an attempt to diffuse the trade war.”

“We imagine any US-China currency pact would be short on detail and would loosely refer to the need to keep the renminbi stable, and that both sides would avoid competitive devaluations (the latter already a part of existing G20 policy).”

“We doubt there would be any detail on what constitutes a stable yuan, however. For example, we doubt the People's Bank of China would be backed into a corner by committing to keep the trade-weighted CFETS Renminbi index stable. And the IMF’s annual work on renminbi fair value, using its External Balance Assessment model, looks too opaque to be highlighted. Actually that model, last produced in summer 2018, suggested the renminbi in real terms was anywhere between 13% undervalued and 7% overvalued.”