USD/CNH can gravitate around the 7.2000 area – ING

 Economists at ING analyze structural issues faced by China’s economy and the USD/CNH outlook.

Increasing talk of the PBoC needing to cut interest rates further

There are no quick fixes for the property sector and the measures announced by policymakers to support local equity markets, such as restrictions on short-selling, are not proving effective. There is increasing talk of the People's Bank Of China needing to cut interest rates further.

While local policymakers will be glad that USD/CNH has reversed from the 7.3000/7.3500 area – breaking a 'sell-China' mindset – they will not want the Renminbi to rally too much either. This tends to suggest that USD/CNH can gravitate around the 7.2000 area and that Asian FX will continue in its very sluggish start to 2024.