The U.S. Fed rate hike on December 16 soften the Chinese currency further. The USD/CNY is currently trading at 6.4800 is highest level since 2001.
The CNH-CNY spread remains high, which shows the foreign selling is taking place in the Chinese market. Moreover, after inclusion of CNY in SDR, pressure on CNY increased.
"We look for a further moderate rise of USD/CNY to 6.65 in 12M, with the risks being skewed towards a greater weakening of the CNY versus USD as the Fed may have to tighten policy more than we expect. Given our bullish forecast for EUR/USD (we target 1.16 in 12M) we look for a substantial increase in EUR/CNH towards 7.71 in 12M", estimates Danske Bank.
