We see most of the drivers that made the CNY weaker in 2023 unwinding in 2024. Easing US-China tensions and concrete support for China’s property sector are set to turn sentiment around. 

A peak in US yields and the Fed cutting rates in 2024 should result in increased exporter conversion of their foreign currency receipts. 

The onshore spot has recently converged towards the fix, but the authorities are still guiding the currency stronger. This is an indication that the PBoC still sees the currency as undervalued. 

We expect state commercial banks, which had been active in shadow intervention in 2023 to support CNY, to start accumulating USD again once the CNY is strong enough. 

We expect the authorities will not allow the CNY to strengthen too much and forecast USD/CNY to end 2024 at 7.