CNY likely to further depreciate against US dollar

In July, the USD/CNY pair retraced from its multi-year high of 6.70. Weakness in the US dollar in the past month has eased pressure on the China’s central bank, PBoC, to devalue the Chinese yuan against a trade-weighted basket of currencies.

China’s July’s foreign exchange reserve data implies that the People’s Bank of China worked less hard to underpin the CNY. Increased property prices, domestic financial market stability and fledgling indications that real economic conditions have rebounded assisted in easing capital outflow pressures, said Lloyds Bank in a research report.

At the same time, the Chinese central bank’s efforts to curtail speculation against the CNY have also added to a more benign foreign exchange environment. However, there is a scope for additional modest decline of the yuan against the US dollar, added Lloyds Bank.