USD/CNH seen higher in the next months – Danske Bank

Arne Rasmussen, Chief Analyst at Danske Bank, assessed the recent appreciation of CNH and expects USD/CNH to grind lower in the medium term.

Key Quotes

“One of the most significant moves in FX markets lately has been the liquidity squeeze in Chinese offshore markets sending USD/CNH down to 6.75. We expect USD/CNH to bounce back up over coming weeks when liquidity comes back and the short CNH squeeze is over”.

“Closing of positions for trend-following accounts may also be exacerbating the move right now. The current squeeze took the CNY-CNH spread even lower yesterday. For corporates with CNY income, there is an opportunity to take advantage of this, as CNY-CNH can be traded one-to-one on the back of commercial flow”.