China Market Monitor - Biggest Two-Day Drop In USD/CNY Since 2005

Published 12/05/2018, 01:19 AM
USD/CNY
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The US-China ceasefire in the trade war has led to the biggest two-day drop in USD/CNY since 2005, falling to 6.83 from 6.96 on Friday. Two things could be behind this - or a combination of 1) squeeze of short CNY positions after the Xi-Trump meeting and 2) intervention by China as part of the deal with China. US Treasury Secretary Stephen Mnuchin yesterday said that the US got a "strong commitment" from China to deal with currency devaluation.

Our current forecast is 7.20 on a 12-month horizon. However, we see downside risk to this forecast, as China will likely be committed to limit currency valuation as part of a trade deal with the US, which we expect will be done next year, see US-China trade: Ceasefire paves the way for the real deal in 2019 , 2 December 2019. We will update the USD/CNY forecast with our monthly FX Forecast Update in mid-December.

To read the entire report Please click on the pdf File Below..

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