We revise lower our outlook for USD/CNY and now forecast a smaller increase on 12M to 7.1 (previous 7.3). China has tightened the grip on USD/CNY and in combination with a weaker USD, the upward pressure on the cross had eased.
We continue to forecast a higher EUR/CNY but not as much as before given the changed expectation for USD/CNY. We still look for a weaker CNY than the market, though, and continue to recommend hedging of CNY income for EUR-based corporates and investors.
While the CNY-CNH spread can show deviations for shorter periods we continue to expect it to trade close to zero most of the time.
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