USD/CNY: Future direction of the CNY versus the dollar remains questionable – Lloyds Bank

In view of the analysts at Lloyds Bank, the future direction of the CNY versus the dollar remains questionable owing to a number of reasons.

Key Quotes

 “USD/CNY remained largely unchanged over the past month as various indicators pointed to economic and capital flow stability. In addition, some of the concerns around earlier protectionist rhetoric from US President Donald Trump have eased. A relatively successful summit earlier this month between the US president and Xi Jinping, president of China, seems to have avoided China being labelled a currency manipulator for the moment. Whether that has any impact on the future direction of the CNY versus the dollar remains questionable.”

“Some of the recent stability in the currency reflects increased capital controls on outflows out of China and from higher interest rates. Both may not prove suitable for China’s stated goals of increased capital account flexibility or the underlying economy. For now, we maintain our view that the CNY should experience gradual depreciation against the US dollar.”