Commerzbank Don’t Expect Further “Substantial” Strengthening In CNY

Commerzbank believe that “we think it is unlikely that the yuan will strengthen substantially further in the near term i.e. USD/CNY will struggle to move below the 7 mark.”

• “Admittedly, Chinese authorities will probably take more aggressive steps to shore up the housing market, support property developers’ financing, and manage the local government debt problems while boosting infrastructure spending. These steps will be positive for China’s growth outlook.”
• “However, we look for stabilization rather than a strong re-acceleration in activity. China will continue to focus on the debt clean up. The real estate troubles will take a few years to resolve, and potential woes will ripple through the markets and the economy.”
• “Also, while the negative interest rate differentials between China and the US are narrowing, they are likely to persist given the divergent policy directions for the Fed and PBoC.”