Dollar strength rather than renminbi weakness has been the main driver of the latest drop in the renminbi, which has taken it to its weakest against the US dollar in over six years. In trade-weighted terms, the renminbi has actually stabilised recently following months of declines. We expect further declines against the dollar in the months ahead, largely on the expectation that the dollar will strengthen against other major currencies and that the PBOC will be keen not to see the trade-weighted depreciation of the past year go into reverse. Our end-2017 forecast remains 7.00/$, compared with 6.76 today.
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