Chinese Yuan: Pace of appreciation against US Dollar seen slowing – ING

Chris Turner at ING notes USD/CNH is consolidating after last week’s sharp decline, as investors hesitate to buy Renminbi with the PBoC slowing lower USD/CNY fixings and US–Iran sanctions risks in focus. ING’s base case remains for a gently offered Dollar and USD/CNY edging lower towards 6.70 over coming months.

Consolidation with gradual CNY gains

"After a sharp run lower last week, USD/CNH is consolidating this week. Two factors may be discouraging investors from buying the renminbi at these levels. The first is that the People's Bank of China (PBoC) seems to be slowing the pace of lower fixings in USD/CNY, perhaps expressing some displeasure over the pace of renminbi gains recently."

"The second is some fears that the new round of US sanctions on Iran will upend the economic détente between the US and China. We think it is probably too early to expect any US sanctioning of any major, state-sponsored Chinese entity relating to Iran trade, but the market will be watching."

"Currently, our base case assumes a gently offered dollar environment and USD/CNY edging lower towards 6.70 over the coming months."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)