Analysts at JP Morgan now see USD/CNY falling to 6.95 by the end of the third quarter compared to the previous forecast of 7.10. The fourth-quarter projection has also been revised lower to 7.0 from 7.10.
The investment bank expects China’s yuan (CNY) to get a lift from large equity-related inflows. “As the correlation between equity inflows and USD/CNY moves has risen to multi-year highs on account of China’s substantially increased weight in major equity benchmarks, risks are skewed toward further downside in USD/CNY from continued equity inflows,” analysts noted.
At press time, the pair is trading at 6.9980, representing a 0.52% gain on a year-to-date basis, but down 2.5% from the high of 7.1766 registered on May 27.
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