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In the early spring months, China showed signs of a cyclical rebound driven a turn in construction spending, pick-up in infrastructure projects and a tentative improvement in exports.
Exports are a source of gradual improvement and a weaker currency is supporting Chinese exports. The currency has turned from a sharp headwind in the first half of 2015 to a tailwind following the recent depreciation of the trade-weighted CNY. Also, a gradual recovery in the US is likely to improve foreign demand.
We look for CNY to continue to weaken on a trade-weighted basis over the next 12 months with USD/CNY hitting 6.85 on 12M (currently 6.60) and EUR/CNY climbing to 8.08 (currently 7.42), said Danske Bank in a report.
