30 Jan 2015
USD/CNY slowly grinding lower – Danske Bank
FXStreet (Edinburgh) - Flemming Nielsen, Senior Analyst at Danske Bank, sees the Chinese currency appreciating in the longer run, slowly dragging the pair lower.
Key Quotes
“Growth has continued to lose momentum but exports have remained resilient while import growth has slowed on the back of markedly lower prices for China’s energy and commodity imports and subdued investment demand”.
“PBoC cut its leading interest rate by 25bp in November and we expect PBOC to cut the reserve requirement twice by 50bp in the coming months”.
“We expect PBoC to continue to widen the daily trading band (currently +/-2%), reduce its intervention and allow more two-way volatility in the exchange rate. The ultimate goal is a floating exchange rate. and a full convertible currency”.
“CNY could depreciate if GDP growth slows and/or stress returns to financial markets. Longer term, liberalisation of China’s capital account could weaken CNY”.
“Despite the recent depreciation, we still expect CNY to appreciate moderately over the next year supported by an increasing current account surplus in the wake of the recent plunge in crude oil and commodity prices”.
“PBOC intervenes less and less in the FX market, so we also expect to see increasing two-way volatility in the USD/CNY exchange rate”.
“China is slowly moving towards a floating exchange rate and a convertible currency”.
Key Quotes
“Growth has continued to lose momentum but exports have remained resilient while import growth has slowed on the back of markedly lower prices for China’s energy and commodity imports and subdued investment demand”.
“PBoC cut its leading interest rate by 25bp in November and we expect PBOC to cut the reserve requirement twice by 50bp in the coming months”.
“We expect PBoC to continue to widen the daily trading band (currently +/-2%), reduce its intervention and allow more two-way volatility in the exchange rate. The ultimate goal is a floating exchange rate. and a full convertible currency”.
“CNY could depreciate if GDP growth slows and/or stress returns to financial markets. Longer term, liberalisation of China’s capital account could weaken CNY”.
“Despite the recent depreciation, we still expect CNY to appreciate moderately over the next year supported by an increasing current account surplus in the wake of the recent plunge in crude oil and commodity prices”.
“PBOC intervenes less and less in the FX market, so we also expect to see increasing two-way volatility in the USD/CNY exchange rate”.
“China is slowly moving towards a floating exchange rate and a convertible currency”.