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Currency update – the Chinese renminbi

Despite the CNY’s recent fall, we believe the People’s Bank of China will refrain from competitive devaluation

Following US President Donald Trump’s announcement of a new 10% tariff on USD300 billion of Chinese goods, the Chinese renminbi (rmb) weakened sharply and breached CNY7.00 per USD.

The recent rmb move, in our view, represents a major shift in the People’s Bank of China’s (PBoC) currency policy, reflecting the deteriorating outlook for trade negotiations with the US and the resulting additional downward pressure on the Chinese economy.

Consequently, we have decided to change our forecasts for the rmb against the US dollar to CNY7.10 per USD for the entire time horizon (three, six and twelve months) from CNY6.95 per USD previously. However, we do not believe it is in China’s best interest to engineer a massive devaluation of its currency either, on concerns of triggering financial risks.

Growth in Japanese Exports and ISM Business New Orders Index, 2011-2019

Growth in Japanese Exports and ISM Business New Orders Index, 2011-2019

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About Luc Luyet
Luc Luyet
Do not hesitate to contact Pictet for an investment proposal. Please contact Zurich Office, the Geneva Office or one of 26 other offices world-wide. Luc Luyet has been working in the financial services industry for the last 12 years. For 8 years, he has been responsible for Technical Analysis for all asset classes and he was a member of a long only fund management team in one of the largest Private Banks in Switzerland and Europe.
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