USD/CNY: In a tight range 7.10-7.35 for most of next year – TDS

The Yuan has taken a beating and is one of the underperforming Asia pairs against the USD. Economists at TD Securities analyze USD/CNY outlook.

USD/CNY at 7.35 marks the line in the sand

The PBoC's mantra now on the Yuan is ‘watch the pace, not the level’ but we suspect USD/CNY at 7.35 marks the line in the sand. 

Structurally, however, we think long-term fair value for USD/CNY has shifted >7 and we see USD/CNY in a tight range of 7.10-7.35 for most of next year, with authorities likely having a clear preference for a weaker CNY to drive export growth.