USD/CNY: The tide has turned for the Chinese currency – Danske Bank

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According to analysts from Danske Bank, the significant depreciation pressure on the CNY is turning into a moderate strengthening trend.

Key Quotes: 

“USD/CNY moved sharply lower this week to 6.74, after flirting with the 7-level only two months ago. We see two main drivers behind the stronger CNY: (1) rising optimism about a trade deal with the US and (2) an overall weakening of the USD on the back of more dovish speeches by Federal Reserve members that suggest it will be on hold for a
while.”

“We believe the tide has turned for the CNY and the significant depreciation pressure is turning into a moderate strengthening trend. A halt to the weakening of the CNY is also likely to be part of a trade deal with the US. If we are right that they strike a trade deal and the Chinese economy recovers gradually from Q2, then the CNY should see more tailwind ahead.”
 

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