USD/CNY not likely to cross 7 levels - ING

Sandeep Kanihama FXStreet Contributor

Iris Pang, economist at ING, suggests that the path of USD/CNY will depend on which liquidity tools are used by the PBoC.

Key Quotes

“If there is no RRR cut in 2H19 but more frequent MLF and TMLF operations, the market may not be too alarmed that the PBoC is in fact easing. The USD/CNY will be fairly stable and range bound around 6.90.”

“If the central bank cuts the RRR twice in 2H19, as we expect, the market will receive a strong easing signal from the central bank. This will put downward pressure on USD/CNY. But let's not forget that the USD/CNY is not a market driven exchange rate.”

“The PBoC has set an invisible line at 7.0 (once in 2016 and once in 2018) because the central bank can't afford the asset market uncertainty that would likely accompany USD/CNY crossing this key level. So USD/CNY could weaken to 6.95 but is unlikely to touch 7.0.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

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