China set to ease further while CNY to weaken gradually over next 12M – Danske Bank

By FXStreet FXStreet (Delhi) – Research Team at Danske Bank, notes that last week China’s premier gave a pretty clear hint that more stimulus will be coming and with China easing further and the Fed about to raise rates, the CNY has seen more depreciation pressure lately.

Key Quotes

“According to the Chinese media, he had assured Chinese businesses at a forum that more would be done to lift growth and mentioned financing as part of this. It clearly suggests to us that China will cut interest rates further. The debt burden in Chinese companies is a concern and, by cutting interest rates, the People’s Bank of China would ease this burden.”

“Inflation is low at 1.3% y/y and hence there is plenty of room on the inflation front to ease further. In Q3, nominal GDP growth at 6.2% y/y was the lowest in 15 years and, even though we see signs of the cycle turning, we believe the government is likely to aim to do more to ease the current burden on businesses. Cutting interest rates is one tool that can be used to do this.”

“As the currency has become more market based, relative rates have started to matter more. We also look for …read more

Source:: FX Street