Bank of America Look For An Uptick In USD/CNY Into Year-End

Bank of America note that "USD/CNY is surprisingly nonchalant amid rising concerns over China's property debt cycle and disappointing growth data. This CNY resiliency could be explained by investors keeping faith in China's policy makers to manage risk and provide stimulus. However, we have argued that unfolding monetary policy stimulus should push USD/CNY to CNY6.55 at end-Q3 and CNY6.60 at year-end as China's yields become less attractive relative to the U.S.. Beneath the CNY's serenity, we see a rising risk premium in CNY forward points and a steep at-the-money implied volatility option curve. Additionally, the CFETS basket is slipping from its lofty levels with CNY weakening by 55bps from its August 23rd peak. CNY appreciation vs. depreciation pressures = finally balanced."