The Chinese renminbi is expected to trade at around 6.90 by the end of this year; however, the fate of the currency will depend on the performance of the greenback. RMB depreciation against the dollar has re-accelerated since October. However, RMB still outperformed most of its peers in Asia.

The RMB index has been kept very stable recently at the expense of predictability of USDCNY fixing. The forecast error of daily USD/CNY fixing has increased, OCBC reported. RMB has shown the trading pattern of event driven for the past few months. The USD/CNY broke 6.60 post-Brexit-shocks and broke 6.70 after official SDR inclusion and again broke 6.80 after Donald Trump’s unprecedented victory.

Clearly RMB’s depreciation in the past month was mainly the result of stronger broad dollar rather than country specific factors. Nevertheless, the recent break of key levels so easily created the space for imagination again. And the consensus on USD/CNY has been shifted again. As such, it is important for China create a new anchor for RMB.

"Should USD continue to strengthen, the USD/CNY is likely to break above 7 soon. Nevertheless, the stable RMB index will help contain the pace of depreciation and eliminate market panic about big devaluation," the report said.