USD/CNY to rise to 7.1 by year-end – BBVA

According to the Research Department at BBVA, the RMB to USD exchange rate is set to depreciate due to the diverging monetary policy between China and the United States. They see the USD/CNY at 7.1 at the end of the year. 

Key Quotes: 

“Chinese economy has experienced a bumpy recovery after the Shanghai lockdown was lifted. We lowered our 2022 prediction from 4.5% to 3.6%.”

“RMB to USD exchange rate is anticipated to depreciate to 7.1 at end-2022 reflecting the recent interest rate cut and the recent breaking-7 trend, amid the diverging monetary policy between China and the US, a stronger USD DXY, slower exports, and capital outflows etc.”

“Depreciation pressure is not only for RMB, but for all EM currencies AM currencies that have a slower pace of rate hike than the FED (JPY, GBP, Euro etc.) , and among all EM currencies, RMB probably depreciated modestly due to capital control measures.”

“We predict RMB to USD exchange rate will be tightly related to USD DXY trend. Based on our forecast of FED interest rate hike path, RMB will depreciate to 7.1 at end-2022, 7 at end-2023 and 6.9% at end-2024.”