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. 

Rate cuts are coming

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