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USD/CNY has continued to trend lower and was last seen trading below the 6.5500 level. Economists at Danske Bank expect a stronger yuan over the next year and forecast the USD/CNY pair at 6.40 in 12 months. 

Key quotes

“We look for a continuation of the move over the next six months as monetary policy is diverging with China aiming for exit, while the US still has an easing bias. Overall USD weakness also supports a decline in USD/CNY in the short-term.”

“The move in the cross has happened a bit faster than we expected and we have revised down our one month forecast to 6.55 (from 6.60), three months forecast to 6.50 (from 6.55) and six months forecast to 6.45 (from 6.50) while keeping our 12 months forecast at 6.40. Our forecast points to a stronger CNY than the forward market expects.”