Downside pressure persists on USD/CNY – Danske Bank

Chief Analyst at Danske Bank Christin Tuxen sees the pair grinding lower for the time being backed by the selling bias around the greenback.

Key Quotes

“The dollar index is back at early-2015 levels with the recent stream of decent data failing to lift the greenback, and it is likely to take a strong PCE reading this week to change the strong downward momentum at present”.

“With the USD weakening further, the USD/CNY is also continuing to move lower, now trading around 6.63, the strongest level of the CNY versus USD since November 2016”.

“Versus the EUR, CNY is weakening and the CNY basket is still weaker than at the beginning of the year. Thus, the decline in USD/CNY is still very much a story about USD weakness rather than CNY strength”.

“As long as the USD weakens, the downward pressure on USD/CNY is likely to continue, but in the medium to long term we expect CNY to weaken also versus the USD – especially when growth is likely to soften on the other side of the 19th National Congress of the Communist Party this autumn”.