FXStreet (Guatemala) – Analysts at Rabobank see further downside in the Yuan to come, despite the PBoC’s assurances that the devaluation was a one-off.
Key Quotes:
“The decision by the PBoC on 11 August to allow market forces to have a bigger influence on the currency led to a sharp decline in the yuan against the dollar and other currencies. The move has fuelled speculation that yet another (big) economy is joining the Global Currency War (see also: “My Half was on the Bottom” by our Asia analyst Mike Every).
Although the PBoC has argued alongside its decision that it was a one-off adjustment and that there is “[…] no basis for persistent depreciation […]”, ensuing market developments and the backdrop against which the decision took place, provided more ammunition for those who believe that “exchange rate flexibility” is simply an excuse for China to engineer a more significant fall in its currency to prop up its sagging economy. We rate ourselves among this group and as such we expect another 4-5% deprecation in the next 12 months.”
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