Weakness in renminbi will add to the broad US dollar bull trend – ING

The People's Bank of China (PBoC) has fixed the renminbi weaker than models were predicting over the last two sessions. This hints that the PBoC could be looking for a slightly weaker renminbi after all. This could unlock another leg lower in Asian FX and add to dollar gains more broadly, in the view of economists at ING.

Asian FX sell-off adds another leg to the dollar rally

“Over the last two sessions, the PBoC has fixed the renminbi quite substantially weaker than models would have predicted. This suggests that the PBoC may be prepared to see – or even encourage – renminbi weakness as a means to support growth.” 

“A stronger USD/CNH could also see some of the commodity-linked currencies like the South African rand and Brazilian real come under more pressure, too.”

“Weakness in the renminbi will merely add to the broad dollar bull trend.”

“Barring any significant de-escalation in Ukraine, all indications point to the DXY trade-weighted dollar index rallying to 100 this week.”