USD/CNY seen at 7.10 in 12-month – Danske Bank

Chief Analyst at Danske Bank Allan von Mehren sees the pair advancing beyond the key 7.0 handle within a year’s view.

Key Quotes

“We revise down our USD/CNY forecast to 7.1 in 12M as we believe China will aim to keep the currency in a fairly tight grip to avoid a too big rise in USD/CNY to cause a protectionist response from the US. And as long as the USD is weakening the trade weighted CNY will still weaken gradually and support Chinese exports. EUR/CNY is expected to rise in tandem with the move higher in EUR/USD as well”.

“The CNH-CNY spread has seen periods of widening (CNH stronger than CNY) when China has engineered a squeeze of offshore liquidity to deter short positions in CNH (and CNY). It normalises fairly quickly, though, to around zero after a while”.