USD/CNY still targets 6.75 in 12-month – Danske Bank

Allan von Mehren, Chief Analyst at Danske Bank, sees the pair around 6.75 within a year’s view.

Key Quotes

“Two opposing forces affect USD/CNY ahead. On the one hand, we expect a Chinese slowdown in combination with continued Fed hikes. This would put upward pressure on USD/CNY. On the other, we expect the overall weakening trend of the USD to continue over the next year. This tends to put downward pressure on USD/CNY – as seen this year”.

“We expect the two forces to even out broadly. We look for a very small increase in USD/CNY to 6.75 in 12M”.

“Against the EUR, we continue to look for weakening to around 8.40 in 12M from 7.84 today. As the forward market is pricing 8.22 in 12M, we continue to recommend that EURbased corporates hedge CNY receivables”.

“We expect the CNY-CNH spread to continue to trade close to zero but with temporary deviations from time to time”.