Since late July, the Chinese yuan has resumed another round of appreciation. USD/CNY reached a low of 6.3430 last Thursday and currently is at a strong level of 6.3625. Although economists at MUFG Bank see no sizable depreciation of CNY in near-term, they expect the USD/CNY pair to eventually turn higher in the months ahead.
The People's Bank of China sends out signals to cool down CNY
“We don’t think the appreciation trend of CNY will remain intact ahead, considering the two-month long range bound behaviour of USD/CNY after the mid-June Forex RRR increase, Thursday’s Forex RRR increase will likely alleviate some degree of appreciation pressure on CNY in near-term as well, as it makes USD liquidity relatively scarce, compared with before, and market participants can see Chinese government’s intention of cooling the strength of CNY.”
“Although the PBoC has an intention to limit CNY’s strength or weaken CNY, it is still unlikely for the PBoC to aggressively intervene in foreign exchange market directly to weaken CNY in near-term, we only expect a mild depreciation bias for CNY against USD for the month ahead, considering also that CNY will likely be supported by exports and portfolio flows as well (maybe not as strong though).”
