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Reassertion of fundamentals and more modest monetary easing in China will likely favour RMB in the longer-term, according to economists at ANZ Bank.

Key quotes

“We expect the Chinese economy to stay on a recovery path. The government’s economic projections announced at the NPC are pragmatic, supported by proactive fiscal and monetary policies.” 

“We expect USD/CNY to be supported at 7.15-7.20 in the near-term.”

“We see upside risk in USD/CNY, to 7.20 or slightly higher in the coming months before easing gradually through 2021. Compared to the US, China’s monetary easing is more modest. Aggressive easing by the US Federal Reserve will ultimately weaken USD, as seen in the aftermath of the GFC.”