USDCNY expected at 6.80 by end of 2015

China's surprise move to adjust the mechanism for determining the USDCNY fixing sent shockwaves through global markets. The daily 9.15am USDCNY fixings will still be keenly watched by the market, although there are signs that the pace of the yuan's decline is likely to slow.

PBoC's comments during the press conference on 13 August, along with FX intervention and administrative measures to slow the CNY's decline after the policy change, suggest that the PBoC does not intend to devalue the CNY too sharply and that the authorities could step in if the CNY movements become disorderly. 

Barclays argues, "As consequences of a new FX regime, USDCNY for end-2015 is expected at 6.80, and relative stability thereafter, albeit still with substantial upside risks. This implies 6% depreciation in coming months following the 3% fall in the first week after the 11 August policy change. We believe the PBoC would tolerate such a notable but still measured up-front adjustment, also to alleviate recent capital outflow pressures."