CNY expected to slip lower in the next months – Danske Bank

Chief Analyst at Danske Bank Allan von Mehren sees CNY losing further ground in the next months.

Key Quotes

“Chinese growth recovered in Q2 driven by the construction sector and a moderate recovery in exports. However, a decline in credit growth recently suggests that the boost from infrastructure spending is fading and growth is likely to lose some momentum again in 2017. We expect the People’s Bank of China (PBoC) to be sidelined for the rest of 2016 as China has signalled it will turn to fiscal policy for more policy support if needed to keep growth up. However, in 2017 we expect renewed monetary easing as economic momentum fades again”.

“We look for CNY to weaken gradually against the USD as the Fed resumes raising rates and China resumes easing monetary policy in 2017. However, we do not expect a bigger devaluation as the CNY is not overvalued and China wants stability around its currency. Against EUR, we expect CNY to depreciate close to 10% +12M”.