FXStreet (Delhi) – Tim Condon, Chief Economist at ING, suggests that they are reviewing their 6.55 year end USDCNY forecast (latest 6.59, Bloomberg median 6.64, NDF 6.92). Key Quotes “The PBOC considers supply and demand in the FX market in setting the fixing rate and December’s 1.50% depreciation was the steepest since August, indicating a sizable reserve outflow. The CNY effective exchange rate is at the post-811 low, which has sparked fears that the PBOC is depreciating the currency for policy purposes. We blame such fears for widening the USDCNH premium to spot USDCNY to a record 2.14% yesterday (the premium narrowed to 1.43% today, which we think was due to exchange market intervention in the CNH market). Our baseline scenario is that such fears are unwarranted. We anticipate exchange market operations will soon reverse some of the recent CNY depreciation, allowing “the RMB exchange rate… to remain basically stable at an adaptive and equilibrium level,” in line with the December 14 statement posted on the CFETS website. That said, we are reviewing our 6.55 yearend USDCNY forecast (latest 6.59, Bloomberg median 6.64, NDF 6.92).” For more information, read our latest forex news.