CNY rally on the back of broad USD depreciation - Westpac

The Chinese yuan might have rallied this week simply on the back of broad USD depreciation but for the onshore yuan to be the strongest Asian currency over the week (+0.8%) hints heavily at official involvement, according to Sean Callow, Research Analyst at Westpac.

Key Quotes

“President Xi’s visit to Hong Kong for the 20th anniversary of the handover is probably a good time to have a strengthening currency and the end of June helps produce headlines such as this from Bloomberg: “Yuan Set for Best Quarter Since 2010 as Stability Replaces Panic” which will surely be welcomed.”

“Prior to the long weekend though, USD/CNY and USD/CNH were trending steadily higher, which we assume remains the underlying trend, at least multi-month/quarter. Our 12mth USD/CNY forecast is 7.20 so while near term momentum is against the US dollar, it should not persist.”