The past month has been a challenging one for both the onshore/offshore Renminbi. Economists at CIBC Capital Markets have revised their Q3 forecast higher to 6.85.
While there is some concern with the degree of debt held at a local government level, there’s still some room for authorities to provide stimulus going forward. Indeed, the risks are becoming skewed towards a cut to the RRR in the coming months which should serve to spur activity via credit channels in the quarters ahead.
Taken with our medium-term expectation of general USD weakness, we still expect the USD/CNY profile to be lower, albeit with a Q3 forecast revised higher now.
USD/CNY – Q3 2023: 6.85 | Q4 2023: 6.79