This from ANZ's latest comments on Asian currencies
I pulled out these snippets on China and the CNY (bolding mine):
- The escalation of trade tensions between the US and China have been behind the more recent weakening in Asian currencies.
- Our models suggest that the Malaysian ringgit is the most under-valued currency based on an average of the PPP and BEER bases … Following the recent sell-off, the Chinese yuan is the next most under-valued currency in the region, with average fair value at around 6.00.
- In aggregate, the misalignment for USD/Asia as a whole is close to a level that has tended to signal that a turnaround may be around the corner. Hence, even if trade tensions show no sign of easing anytime soon, the extent of further Asian currency weakness may be limited from here
ANZ do add this on the CNY:
… average fair value at around 6.00. However, with trade tensions hanging over the currency, the valuation gap is unlikely to close anytime soon
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Note
- PPP is Purchasing Power Parity
- BEER is (not what you think, K?) Behavioural Equilibrium Exchange Rate
