CNY: From Certain Revaluation To Potential Devaluation

With the US-China Strategic and Economic Dialogue scheduled for May 24- 25 in Beijing, the markets still appear to be expecting some form of agreement on yuan appreciation. However, with the Chinese property market showing signs of stress and global credit stress likely to undermine Chinese exports, we see the CNY/US$ remaining at CNY6.8270/US$. The 1-year non-deliverable forward, meanwhile, should weaken to reflect this.

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