Diverging paths for monetary policy between the Federal Reserve and the People’s Bank of China (PBoC) have already been one of the key contributors to a weaker renminbi this year. Economists at Wells Fargo continue to forecast a weaker Chinese currency, albeit very modest renminbi depreciation through the end of this year.
Fed to tighten monetary policy, PBoC to keep policy steady
“With the PBoC now on hold and the Fed lifting policy rates, we expect diverging paths for monetary policy between the two central banks to persist. However, with monetary policy settings now likely to be on hold rather than more accommodative as well as the local economy demonstrating a recovery, we expect less depreciation pressure to build on the renminbi.”
“Going forward, we expect only modest Chinese yuan weakness by the end of this year. By the end of Q4-2022, we forecast the USD/CNY exchange rate to reach 6.72.”
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