China has been the centre of global attention during the past month due to: – historically large CNY depreciation and sharp stock market decline – the official beginning of the trade war with the US • The extensive CNY weakness against both the USD and the currency basket caught the market off guard. The weakness is overdone, but correction might not happen now. • The elevated near-term risk surrounding the trade war will likely keep depreciation pressure on the CNY in the coming 3-6 months. However, USD/CNY faces limited upside as the PBoC will likely defend the level of 6.70 to avoid capital flight. • Trade war ... (full story)