USD/CNY likely to trade around 6.95 by end-2017, says Lloyds Bank

The USD/CNY pair has consolidated near the 6.8 mark in the recent weeks, which is its lowest level since November 2016. The Chinese economic data have been mixed since the beginning of this year; however, worries regarding devaluation to stimulate the economic activity have alleviated for the moment, noted Lloyds Bank in a research report. This is greatly because of tighter liquidity conditions in China and the recent attempts to stem portfolio outflows.

In the first instance, China’s policymakers are expected to depend on looser monetary policy rather than the currency to stimulate growth. Moreover, the Chinese yuan has greatly underperformed other Asian currencies since the beginning of the year. This has alleviated pressure on the People’s Bank of China to devalue in an attempt to keep external competitiveness. However, the CNY is still viewed as modestly overvalued.

“We forecast USD/CNY to end the year at 6.95”, added Lloyds Bank.