Analysts at TD Securities explained that they have reached our end of year target for USDCNY early as Chinese policymakers have allowed for a more rapid pace of adjustment to fundamental factors than we had expected.
Key Quotes:
“We thus revise upwards our view for USDCNY to reach 7.10 by year-end, before topping out near 7.20 at the end of Q1’19.”
“This is based on our view that domestic Chinese policy constraints on the monetary and regulatory front leave the CNY REER as the operative shock absorber and main adjustment variable for monetary conditions to buffer the economy.”
“We see the potential for another 3%-4% CNY REER depreciation to bring monetary conditions to more neutral relative levels.”
“This however remains a key fundamentally-driven adjustment to bring CNY more in line with other Asian REER developments over the past year, and should not be interpreted as tool used to “punish” in the ongoing U.S.-China trade dispute.”
Share
