USD/CNY: Yuan under significant pressure before economic growth finds a floor – Commerzbank

FXStreet Insights Team FXStreet

USD/CNY largely hovered below the 7.30 handle in the second half of August and broke through it in early September to reach 7.35 at one point. Economists at Commerzbank analyze the pair’s outlook.

Weak for longer

The Yuan will remain under pressure until there are clear signs that the deteriorating economic momentum turns around.

The PBoC will continue to defend the currency and manage the pace of weakening as depreciation pressure persists.

We forecast USD/CNY to stay at around 7.30 in the near term before easing back somewhat towards the end of the year. Longer out, we expect USD/CNY to fall below 7.00 next year due to the expectation of a softer USD as we anticipate the Fed to cut its key interest rate in 2024.

EUR/CNY will likely move upward in the coming months and stay elevated in 2024, benefiting from the ECB’s restrictive monetary policy for some time ahead.

Source: Commerzbank Research

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FXStreet Insights Team

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