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Researchers at UOB Group in the Quarterly Global Outlook remain bearish on the Chinese currency and see USD/CNY heading toward 7.25/30 in the next year.

Key Quotes

“Our weaker outlook of China’s economy also supports our view of a weaker CNY going forth. We have recently downgraded China’s growth to 5.9% in 2020 from 6.2% previously after the US-China trade conflict has escalated into the Worst Case Scenario of our earlier assessment whereby all bilateral merchandise trade flows are tariffed”.

“Overall, underpinned by the various headwinds against the CNY, we believe USD/CNY will trade in new normal above 7.00 going forth. Our new point forecasts for USD/CNY are 7.20 at 4Q19, 7.25 at 1Q20 and 7.30 for both 2Q and 3Q20. With the unlikelihood of a trade deal in the near term, USD/CNY is likely to stay “sticky” above 7.00. As such we continue to urge investors to hedge their USD risks”.