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Investment banks are eager to cut RMB forecasts, 7 yuan against the dollar is at risk

by Tom Westbrook

SINGAPORE (Reuters) – Major investment institutions have cut their forecasts for the yuan’s exchange rate as the yuan’s fall against the dollar accelerates, with some expecting the yuan to rise against the dollar. The break above the $7 milestone comes ahead of next month’s politically sensitive party congress despite efforts by authorities to slow the slide.

The yuan has fallen 2.7% against the dollar over the past three weeks to hit a two-year low of 6. 9350, down more than 8% so far this year, pressured by a global strengthening dollar and a deepening economic slowdown in China.

A quick break above 7 USD/USD – only twice since the 2008 global financial crisis – could raise concerns about capital outflows, as the authorities Like the desire to mobilize resources to revive an economy that has been battered by the coronavirus- outbreak and a weak housing market.

It could also be an unwelcome distraction from the leaders who gathered in October. 16 For the party ress, held every five years, although some analysts expect the authorities will eventually accept more devaluation of the yuan.

“In a three-month period, we expect policymakers to be more tolerant of RMB depreciation, because by then 20 The party congress is over and a weaker currency could help reduce headwinds to export growth,” Goldman Sachs (NYSE: GS ) said in a note.

Goldman Sachs and ANZ don’t think the $7 mark will be breached until after the party convention.

But others including Nomura, Mitsubishi UFJ and Riksbank also see a chance for the yuan to hit a key hurdle this month.

Market analysts generally agree that the People’s Bank of China’s (PBOC) surprise cut in key interest rates in August accelerated the yuan’s depreciation, reaffirming that Beijing is an outlier in global monetary policy, while most other major economies are closing in on the tighten policy to curb inflation.

“(China’s policy) just underscores weakness Maybank analysts said

is in easing mode,” they added. “Such an environment would be unfavorable for the renminbi.”

Maybank lowered its forecast for the renminbi-dollar exchange rate to 7 at the end of the third and sixth quarters. 95 At the end of December, from their previous forecast of 6.75 and 6.70 start.

Ken Cheung, chief Asia FX strategist at Mizuho Bank, explicitly links the yuan outlook to China’s growth outlook: “Market participants tend to be long USD/CNY

to hedge macro risks in China.”

However, the authorities expressed concern about the recent rapid decline. Reuters reported that China’s foreign exchange regulator called a number of banks in late August, warning them not to sell the yuan aggressively.

RMB central parity continues to be higher than expected Irene Cheung, senior strategist for Asia at ANZ, said the past two weeks are another clear sign that the authorities are not currently Hope to see a big drop.

“This will help limit USD/CNY near the 6.9 mark in the near term. However, there is a possibility of a break above the 7 mark after the National Convention,” she said.



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