USD/CNY lower: more a reflection of USD weakness than of CNY strength - Danske Bank

According to analysts from Danske Bank, the forecast of USD/CNY at 7.1 in 12 months looks increasingly too highs. 

Key Quotes: 

“In Chinese financial markets, stocks have continued to perform, while the CNY has strengthened further against the USD. However, the latter is more a reflection of USD weakness than of CNY strength.”

“Still, with USD/CNY moving down to 6.73, our 12M forecast for USD/CNY of 7.1 looks increasingly too high. We intend to review this when we next revise our forecasts in mid-August.”

“While CNY is stronger than expected versus the USD, it continues to weaken against EUR and EUR/JPY has moved higher to 7.89. We continue to recommend hedging of CNY receivables as we look for a further increase in EUR/CNY. Bond yields in China have been quite stable lately. The financial stress in bond markets seen in May is no longer in place, as the authorities have eased liquidity leading to lower 3M money-market rates.”