USD/CNY Fundamental Analysis – December 31, 2015 – Forecast

Analysis and Recommendation:

The USD/CNY gained 60 points to 6.4908 on the strength of the US dollar ahead of New Years. China’s central bank weakened the mid-point rate for the Chinese yuan against the US dollar at the lowest level in 54 months. The People’s Bank of China set the central parity rate, an official reference for daily trading, at CNY 6.4864 per dollar before the interbank market opens, compared to Monday’s CNY 6.4750, according to the China Foreign Exchange Trading System. The official rate weakened for the second consecutive day against the dollar to hit its lowest level since June 2011.

In China’s spot foreign exchange market, the central bank strictly controls trading of the yuan. It sets the daily official rate every morning and allows the yuan to rise or fall up to 2 percent from the rate.
Earlier in the month, the central bank introduced the trade-weighted basket, a move that will eventually loosen the Chinese currency’s link to the dollar and will let the yuan weaken.

The depreciation of the yuan comes amid continuing concern over China’s economic slowdown. China’s economy grew 6.9 percent year-on-year in the third quarter for the slowest pace of expansion since the aftermath of the 2008-2009 global financial crisis.

Economists expect the yuan to continue depreciating slightly. Some even predict that the Chinese currency will fall gradually to about 6.5 to the US dollar by the end of this month, and perhaps drop to 6.7 next year. Since it was announced at the end of last month that the yuan would join the International Monetary Fund’s Special Drawing Rights basket as one of five global reserve currencies, the yuan-dollar exchange rate has fallen by 0.83 percent.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports, which covers the current week and are published by Sunday before the new week begins. Daily we share any new events, forecasts or analysis that affect the current day. To achieve a full accurate understanding it is important that you study all of our data and analysis as a whole. Please click on the links to find the most recent reports for this asset.

Today’s economic releases:

 

Upcoming Economic Events that you should be monitoring:

Thursday, December 31, 2015

Government Bond Auctions

Date Time Country

Dec 29 11:10 Italy Auctions CTZ

Dec 29 n/a UK Announces details of Gilt auction on Jan 05 & 07

Dec 29 19:00 US Holds 5-year note auction

Dec 30 11:10 Italy Auctions BTPs/CCTeus

Dec 30 19:00 US Holds 7-year note auction