FXStreet (Guatemala) – Khoon Goh, analyst at ANZ explained that they have downgraded their CNY forecasts in light of the shift in the RMB’s exchange rate regime.
Key Quotes:
“We now forecast USD/CNY to end the year at 6.55. Policy divergence between China and the US, and increased hedging and repayment of foreign currency debt mean the balance is tilted towards more dollar demand in the near term.”
“Though China’s shift towards currency flexibility is a positive development, we expect CNY’s elevated real effective exchange rate to correct back towards fairer levels over the next couple of years. This requires USD/CNY to move towards 6.85 by end 2017.”
“How much depreciation pressure is allowed to flow through is ultimately a policy choice. Concerns about both domestic and external instability are likely to keep policy conservative.”
(Market News Provided by FXstreet)