USD/CNY may edge toward 6.70 over months as China’s central bank tempers yuan strength amid geopolitical risks.
The Chinese yuan’s appreciation against the US dollar is expected to slow as the People’s Bank of China moderates its pace of lower USD/CNY fixings. Investors are hesitant to buy the renminbi amid concerns over US-Iran sanctions potentially disrupting US-China economic relations.
Last week’s sharp decline in USD/CNH has given way to consolidation this week. ING’s base case projects a gently weakening dollar, with USD/CNY gradually moving toward 6.70 in the coming months. However, the PBoC’s recent caution on yuan strength may limit near-term gains.
Geopolitical risks, including potential US sanctions on Chinese entities linked to Iran, are also weighing on sentiment. While no major sanctions are expected immediately, markets remain watchful.