FXStreet (Edinburgh) – Analysts at UOB believe the Chinese currency is poised for further declines in the next months.
Key Quotes
“While the simultaneous easing is likely to stabilize investor sentiment, it is unlikely to reverse the steep losses in the equity market”.
“Note that the last simultaneous cut in rates and RRR announced on 27 Jun did not help Chinese equity market, which ended down more than 3% on 29 Jun”.
“Going forward, we see lesser room for interest rate cuts though another two rounds of RRR cuts are likely before the end of 2015”.
“As for FX, the latest aggressive move and more RRR cuts to come is likely to result in further downside, and we are adjusting our 2015 call to 6.50/USD (previous: 6.45), or 4.8% decline over 2014”.
“However, we doubt the extent of 10% depreciation or more for the currency is in order, given the international political sensitivity of this issue, the extent of foreign currency debt in China, and most importantly China’s ambition in achieving a reserve currency status”.
(Market News Provided by FXstreet)