USD-CNY forecast to be lowered – Commerzbank

Analyst, Zhou Hao at Commerzbank, suggests that on the Chinese policy front, given the uncertain growth outlook, they still expect the PBoC to cut the policy rates by 25bps in Q2, and broader easing policies will be maintained in China over the remainder of the year.

Key Quotes

“In addition, we think the PBoC will cut the reserve requirement ratio by 150bps before the end of this year, in order to counter capital outflows. All these will lead to CNY depreciation, albeit to a lesser extent than we originally forecast.

We now have a year-end forecast of 6.75 in USD-CNY from 6.90 previously. This also implies that significant USD appreciation is no longer likely to manifest, in line with a slower pace of Fed rate hikes.”