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The Chinese Yuan faces the likeliness of extra pullbacks, noted Analysts at Danske Bank.

Key Quotes

“Mounting trade tensions between the US and China have put downward pressure on the CNY and the risk of continued CNY weakness remains”.

“China is more vulnerable than the US in the short term, as its economy is already weakening and China is more dependent on exports, while the US enjoys fiscal support and is a more closed economy”.

“We expect pressure on the Chinese economy to lead to further easing by the People’s Bank of China and emphasise the risk of outflows also picking up, supporting the case for a weaker CNY”.

“We revised our USD/CNY and EUR/CNY forecasts higher to target USD/CNY at 6.70 in 12M and EUR/CNY at 8.38 in 12M. While we maintain these here, we stress that risks remain skewed towards a significantly weaker CNY than incorporated in our forecasts”.