CNY expected to depreciate further – Danske Bank

Allan von Mehren, Chief Analyst at Danske Bank, expects the Chinese currency to lose further ground in the next months, albeit at a slower pace.

Key Quotes

“PBoC managed to calm down the markets faster than expected and the depreciation pressure on CNY versus the USD has eased. We still look for CNY to weaken, though, on divergence in monetary policy between the US and China. But the risks are much more balanced now”.

“The CNH-CNY spread has been eliminated again after the depreciation pressure eased. We expect the spread to stay around zero throughout the forecast horizon. Hence any basis risk in hedging CNY exposure through CNH is expected to be limited”.