CNY to suffer further downward pressure against the US dollar – MUFG

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China has stepped up its economic stimulus. Furthermore, the People’s Bank of China (PBoC) has fixed the yuan stronger than model-based estimates had suggested. Nonetheless, economists at MUFG Bank expect the CNY to remain under pressure against the US dollar.

“The latest developments suggest that the fresh infrastructure stimulus announced will provide only a short-term boost for market sentiment towards the Chinese economy.

“The Chinese renminbi has strengthened following the PBoC’s decision to set a stronger expected daily fixing rate. It sends a signal to market participants that policymakers in China are unhappy about the recent faster pace of renminbi depreciation. The pushback from the PBoC is though unlikely to reverse the weakening trend that is currently in place.”

“Heightened concerns over economic weakness in China and the PBoC’s decision to lower rates further should keep downward pressure on the renminbi against the US dollar.”

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