Chinese assets are in focus as the CNY continues to weaken and USD/CNY moved above 6.80 overnight for the first time in more than a year after the People’s Bank of China weakened the USD/CNY fixing by 0.9% to 6.7671, points out the research team at Danske Bank.
Key Quotes
“This was the largest daily weakening of the CNY fixing in two years. USD/CNH has increased to 6.8133 and that CNH is now trading quite a bit weaker than CNY is a clear sign of depreciation pressure.”
“With exports under pressure, China is probably happy with a weaker currency and there is no sign yet of a strong attempt to stop the depreciation, as offshore money-market rates are not pushed markedly higher to ‘defend the currency’.”
“We continue to see downside pressure on the CNY, as there are no signs of a thawing in the trade war (no negotiations) and we expect to see more monetary policy easing to support the economy going into the trade war with the US.”
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