USD/CNY seen at 6.20 in a year’s view – Danske Bank

Allan von Mehren, Chief Analyst at Danske Bank, sees the pair grinding lower towards the 6.20 region in a year’s time.

Key Quotes

“We look for Chinese money market rates to ease a bit in 2018 following a fairly big rise in 2017. M1 growth has fallen quite sharply due to the monetary policy and we expect PBoC to take the foot off the brake for a bit. As US money market rates are set to rise further, relative rates will move in favour of the USD. Chinese FX policy continues to be a managed peg against a basket of currencies. The basket has strengthened about 4% over the past year adding some headwind to exports”.

“The strong correlation with the overall USD development continues and a move in relative rates in favour of the USD has not been able to break this correlation. We thus put more weight on the correlation with the USD. We keep our forecast of a decline in USD/CNY to 6.20 in 12M”.

“Our forecast for EUR/CNY is for a move towards 7.94 in 12M (forward is 8.10) from the current level of 7.75”.