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- USD/CNY to rise towards 6.70 by year-end as renminbi’s strength fades – CE
USD/CNY to rise towards 6.70 by year-end as renminbi’s strength fades – CE
FXStreet reports that economists at Capital Economics discusses USD/CNY prospects.
“The renminbi’s rally appears to have made policymakers uncomfortable. The PBoC’s decision to increase the reserve requirements for banks’ foreign exchange deposits looks intended to rein in the renminbi’s appreciation, by forcing banks to hold more foreign currency. Perhaps more importantly, it signals both the central bank’s preference for a somewhat weaker (or at least not significantly stronger) currency, and its willingness to step in to manage the foreign exchange market.”
“But for all the talk of a ‘market-determined’ exchange rate, we doubt that the Chinese authorities will allow the renminbi to become genuinely free-floating any time soon. We expect the renminbi to weaken, at least vis-a-vis the US dollar, as China’s economy slows and the yield differential between US Treasuries and Chinese government bonds shifts in favour of the greenback. We forecast the USD/CNY pair to end the year at 6.7, compared to ~6.4 currently.”
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