USD/CNY weakened over the past month from around 7.25 to 7.27. Another month of soft data has increased the odds of easing in the next few months, ING’s FX analysts note.

USD/CNY weakens in the past month

“USD/CNY weakened over the past month from around 7.25 to 7.27, reflecting capital outflows amid market weakness and broader dollar strength. The People’s Bank of China (PBOC) usage of the counter-cyclical factor hit a new high in July.”

“Another month of soft data has increased the odds of easing in the next few months. However, the PBOC also announced it would start borrowing bonds to sell and try to cool the government bond rally. The net impact on yields is unclear.”

“We are adjusting our CNY forecasts weaker as yield differentials will remain unfavourable until the Fed starts easing.”