More Volatility In Usdcny

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More Volatility In Usdcny

Boa Forecasts More Volatility In Usd/Cny

According to analysts from BoA (Bank of America), the USD/CNY pair will likely go through more volatility in the coming weeks.

Right now, USD/CNY is trading near 7.0849 with a +0.3% gain for the day. Over all, the USD/CNY has gained almost 1$ in the last week.

Us Elections Pose Risk To Us Dollar

BoA analysts added that the upcoming US election in November, along with attendant tariffs, are some major risks. So, if we see more depreciation in the CNY, it wouldn't be too much of a surprise.

Data shows that the 7.00 handle is a floor for the USD/CNY as the Chinese authorities are trying to restore credibility and growth in the economy.

Based on the 3-month and 3-year timeframe, the value of USD/CNY should be 6.95. This forecast was made by the BoA and shows that more downside is ahead for the USD/CNY.

However, it would not be a good thing for the CNY to appreciate against the US Dollar. After all, China is trying to spur growth in the economy, and a stronger currency could make it difficult to achieve a 5% growth target.

Meanwhile, the US Dollar weakness will likely increase in intensity as we are nearing the US elections. However, if the outcome of the elections results in the de-escalation of the US-China tension, it could be helpful for the USD/CNY.

In China, the key issues are weak growth and even weaker inflation. So, the most obvious way for the Central Bank of China to counter this is to lower the policy rate. At the same time, the PBoC is expected to announce more stimulus measures to support the economy.

All of these actions from the PBoC will be helpful in driving growth, but they will put pressure on the CNY. Based on this perspective, the path of least resistance for the USD/CNY is towards the upside.

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