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CNY expected to depreciate further – Danske Bank

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Feb 26, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    Allan von Mehren, Chief Analyst at Danske Bank, expects the Chinese currency to grind lower in the next months.

    Key Quotes

    USD/CNY has fallen significantly recently, which reflects declining Fed rate expectations and the PBoC’s increased focus on the trade-weighted RMB”.

    “Hence, we have lowered our 1M forecast to 6.60, from 6.65. Still, given the divergence in monetary policy and that CNY is more market based, we look for a further depreciation of the CNY against the USD of around 7% over the next 12 months”.

    “We expect market pressure to continue, although China has shown a stronger willingness to defend the currency by draining liquidity in the CNH market”.

    “We still do not expect a big devaluation of the trade weighted CNY, as this would be likely to backfire and escalate capital outflows”.
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