CNY Outlook - More Weakness Ahead

Published 01/07/2016, 05:22 AM
Updated 05/14/2017, 06:45 AM

The CNY has weakened considerably against the USD over the past month and the move accelerated this week. It followed equity turmoil and confusion over a fixing by the People's Bank of China (PBoC) that was weaker than its new regime should warrant.

In this document we look at what is driving Chinese FX policy and what guide posts to look for in determining where the CNY is heading. We have revised higher our USD/CNY forecast, looking for a bigger weakening of the CNY over the next year to 7.0 versus the USD - a further depreciation of 7% over 12 months. We look for a weakening against the EUR of around 15% over the next year.

We continue to recommend corporates hedge receivables in CNY via the CNH market. The CNH-CNY spread should narrow in 12M from very wide levels.

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

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