USD/CNY: Rise reflects US dollar strength - Danske Bank
|According to analysts from Danske Bank, the rise in the USD/CNY during the past month is based on a stronger US dollar. They see the pair moving to the upside in the medium term on the back of CNY weakness.
Key Quotes:
“The trade-weighted USD has strengthened close to 5% over the past month, whereas the move in USD/CNY is only around 1.6%. This is also reflected in the CNY being stronger versus the EUR compared to a month ago. While capital outflows have picked up in the past months, the main driver of the recent USD/CNY move is thus USD strength. This in contrast with the rise in USD/CNY from August 2015 to July 2016, which was part of a broader CNY weakening.”
“There is no sign that China is intervening to stem the move in USD/CNY. This would show up in higher CNH money market rates but these are actually lower this week. It partly explains why the rise in USD/CNY is not associated with a risk-off move as was the case in January and over the summer when USD/CNY also moved up.”
“We continue to look for the CNY to weaken over the coming year. However, we expect it to be broader-based CNY weakness due to fading growth momentum in 2017 and increasing financial risks from a sharp rise in corporate debt and growth in shadow financing.”
“We look for USD/CNY to move to 7.1 +12m (current 6.77) and EUR/CNY to move to 8.38 +12M (current 7.37).”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.