USD/CNY: Gently lower trend still in play for 2018 - ING

China has arguably, and unexpectedly, stolen the market spotlight for two days in a row now as on Tuesday, it was news of the PBoC removing its countercyclical factor from its daily USD/CNY fixing mechanism, points out Viraj Patel, Research Analyst at ING.

Key Quotes

“Despite the initial negative reaction, we actually believe the move should be interpreted as a positive one for the CNY’s medium-term outlook – not least given that it signals greater level of comfort over the PBoC’s efforts to liberalise its FX regime. But like the China Treasuries story, we doubt that noise around the removal of the countercyclical factor has altered the general trend. At best, the PBOC will be willing to tolerate a bit of appreciation pressure in the Renminbi this year – and in a weakening $ environment, we expect USD/CNY to gently nudge lower to 6.30 by year-end.”