The recent sharp depreciation of the Chinese Renminbi (RMB) was in line with the expectations of the BBVA Research Team at the beginning of the year amid the unsynchronized monetary policy cycle between China and the US. They predict RMB to USD exchange rate at 6.6 at end-2022 with upside risks. 

Key Quotes: 

“Depreciation is unavoidable amid the contrast monetary policy measures between China and the US when we talk about RMB exchange rate trend till end-2022. We predict the RMB to USD exchange rate at end- 2022 to be 6.6 with some upside risk, while a macro analytical framework is more important to understand the underlying logic and make the forecasting. In addition, policy intentions of Chinese central banks on exchange rate need to be carefully considered and evaluated.”

“In the medium-to-long term, the PBoC is willing the RMB exchange rate to display some two-way fluctuation around its equilibrium level, and they will certainly intervene the FX market if the RMB exchange rate displays some one-way trending, either one-way appreciation or depreciation. That means, China’s monetary authorities are likely to stick to their pledge of keeping the CNY stable on a trade-weighted basis.”