Rising U.S. rates are leading to capital outflows and is unsynchronized with China’s divergent monetary policy and downside growth risks. Trade and current account surpluses strength were key to CNY stability during the global pandemic, but this is being undermined by a deteriorating terms of trade. Revising USD/CNY forecasts higher to 6.60 at end of 2Q from 6.40 previously, and to 6.80 end-4Q from 6.60 prior. Expect USD/CNY to rise toward 6.90 end-1Q of 2023, before reverting to long-term equilibrium fair value of 6.50. - BofA FX and Rates Strategy

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