Market enthusiasm about China’s reopening did not last long. Even some of the more resilient indicators failed to mask the country’s structural problems. The market has shrugged off the technical recovery and is more focused on structural challenges. Under these circumstances, the CNY is likely to weaken. We have raised our USD/CNY forecasts to 7.30 in 3Q, 7.40 in 4Q and in 1Q24. 

Meanwhile, the PBoC does not seem too concerned about the currency weakness. The underwhelming growth outlook and rising expectations of further monetary easing could maintain downward pressure on the CNY for some time yet.