USD/CNY: PBoC to allow the Yuan to depreciate – Commerzbank

FXStreet Insights Team FXStreet

The Yuan breached the 7 mark against the Dollar after the disappointing April data. Economists at Commerzbank expect further CNY depreciation.

Pressure on the Yuan may persist

“Pressure on the Yuan may persist and the risk is significant as weak private sector confidence could derail China’s economic recovery. The widening in the negative yield spreads between China and the US and the prospect for further monetary easing in China will also weigh on the CNY.”

“It will be interesting to see how the PBoC will react in the coming days. We don’t think the central bank will act decisively to defend the currency for now. Instead, we expect the PBoC to allow the Yuan to depreciate. But we think it may step in with larger tweaks to the daily fixing or other policy actions if there are abrupt moves in CNY, aiming to avoid the build-up of one-sided depreciation expectations.”

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