Acquiescence of a weaker CNY does not imply free fall in the currency – Commerzbank

The Chinese yua has fallen sharply by over 2% in the past two weeks and to the weakest level in two years. Nevertheless, acquiescence of weaker CNY does not mean free fall, as economists at Commerzbank note.

People's Bank of China has the ammunition to support CNY if needed

“We suspect PBoC is acquiescing to a weaker CNY but it will continue to keep a close eye on it.” 

“It is not unusual for FX rates to overshoot in the short-term and this could play out for USD/CNY.” 

“We need to bear in mind that PBoC has the ammunition to support CNY if needed and the pace of CNY depreciation will dictate PBoC intervention.”