FX: It's Time To Recover (CNY) Chinese Yuan! ING Forecasts - USD/CNY, USD/INR, USD/IDR

China: PMI positively surprises the market


Lockdown remains the main risk

Current spot: 6.7344

  • The Yuan weakened in May due to a two-month long lockdown in Shanghai. The announcement of an easing in movement restrictions has led to a moderate appreciation.
  • We can't rule out further lockdowns. But we expect they will be more flexible and will not do as much damage to the economy. Consequently, future yuan weakness should be less dramatic.
  • The recovery of economic activity is focussed on the rebound of retail sales in June. But as residents are still hesitant about cross-province travel due to uncertain travel restrictions, we believe the retail sales recovery in June could remain quite soft.


Protected by the RBI, but for how long?

Current spot: 78.14

  • After its sharp depreciation at the beginning of May, the INR has been improbably stable during the second half of May and early June. The stability in the INR is consistent with the shift of the Reserve Bank to a more hawkish stance, and the first rate-hike this cycle. But it also looks as if there has been some considerable central bank action behind its stability.
  • We don’t think this will last, and we don’t think the Reserve Bank of India is fundamentally opposed to depreciation, just “disorderly” depreciation, so we believe it will depreciate further.
  • Even with the RBI hiking again, we believe the INR will resume its weakening in the near-term.


IDR under pressure following palm oil export ban

Current spot: 14680

  • • In early May, the IDR retreated sharply as the government’s palm oil export ban was expected to weigh on export earnings. A narrowing of the trade surplus could undermine a key support for the currency.
  • • Bank Indonesia also (BI) kept policy rates untouched at their last meeting, citing “manageable” inflation. They did, however, announce a plan to hike reserve requirements to 9% by 3Q to mop up excess liquidity.
  • • The IDR has since stabilized after the authorities allowed select companies to resume palm oil exports. But the currency will remain pressured as long as the partial ban remains in place.

This article is a part of a report by ING Economics


This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

China: PMI positively surprises the market

ING Economics

INGs global economists and strategists tell you whats happening and is likely to happen in the world of global markets.

Our analysis and forecasts will help you respond and stay a step ahead in the world of macroeconomics, central banks, FX, commodities and everything else in between. Visit ING.com.

Follow ING Economics on social media:

Twitter | LinkedIn