BNP on the sliding yuan – no hard line-in-the-sand

<p>I posted earlier on JPM on the yuan:</p><ul><li><a href="https://www.forexlive.com/centralbank/jp-morgan-says-the-chinese-yuan-will-keep-on-falling-20230822/" target="_blank" rel="follow" data-article-link="true">JP Morgan says the Chinese yuan will keep on falling</a></li></ul><p>BNP have a similar view on a lower RMB, saying it'll keep falling:</p><ul><li>“Ultimately it depends on the yield difference between US and China, and we’re witnessing a nearly record widening of nominal rates differential.”</li></ul><p>and</p><ul><li>“We don’t think there is a hard line-in-the-sand for the exchange rate.”</li></ul><p>TD, too, are bearish:</p><ul><li>In an unexpected move, China's 1-year LPR was cut less than expected by 10 bps to 3.45% and the 5-year rate was kept unchanged at 4.20%.

Overall, the disappointment in the LPR decision adds more confusion for investors, especially after the meeting between PBoC and state banks which pledged for increased loan support.

Despite a stronger-expected-fixing today (~880 pips), markets may read the LPR decision as a step back in policy support from authorities and may pressure USD/CNH back to YTD highs at 7.35.</li></ul><p>Offshore yuan – the PBoC is holding the line so far this week. </p>

This article was written by Eamonn Sheridan at www.forexlive.com.