USD/CNY: 7.40 seems a step too far at this juncture, though not something ruled out – ING

Economists at ING discuss the Chinese Yuan outlook and analyze the USD/CNY pair.

Near-term targets of USD/CNY 7.30 looks plausible and in line with the 2022 highs

There is a chance that the Chinese government will come out with a broader package of support measures than it has done so far, and that will likely see the CNY rally. That said, we aren't looking for a bazooka from the authorities, more of a shot-gun approach of smaller measures, and believe that any uplift may be short-lived.

One-way traffic in the currency is not something the PBoC will want to see either, but we don't believe they will be totally averse to seeing the CNY weaken further if it does so in a controlled fashion, especially as we doubt that they are done with cutting rates just yet. 

Market forecasters are toying with near-term targets of USD/CNY 7.30 which looks plausible and in line with the 2022 highs. 7.40 would take the CNY into territory that it has not visited since 2007 and seems a step too far at this juncture, though not something we would rule out.