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Euro to Chinese Yuan (EUR/CNY) Exchange Rate Forecast to Rally on PBoC Intervention

Published: 12 Aug at 5 PM Tags: Euro Exchange Rate, Currency Exchange, Euro Crisis, Exchange Rates,

The Euro to Chinese Yuan (EUR/CNY) exchange rate rallied considerably during Wednesday’s European session.

After Greek officials agreed to the terms of the third bailout deal with creditors and Eurozone officials, the single currency surged versus its major peers. Although the terms are yet to be agreed by Greek MPs, fears regarding the Hellenic nation’s inability to repay the European Central Bank (ECB) on August 20th eased considerably. Furthermore, most experts feel that Greek Prime Minister Alexis Tsipras will have enough opposition support for the deal to overshadow dissenters in his own party, Syriza.

‘It is a very tough deal. The left had to either escape or take huge responsibilities and prove it can help society,’ Health Minister Panagiotis Kouroublis told local radio. ‘After this deal the prime minister should call for elections, so that the Greek people can vote on whether they approve the programme or want something else,’ he said.

The Euro to Chinese Yuan (EUR/CNY) exchange rate is currently trending in the region of 7.1470.

Conversely, the Chinese Yuan dived versus its major peers for a second consecutive day. This is due to the announcement from the People’s Bank of China (PBoC) that the central bank had intervened in the currency market in order to devalue the Yuan. This was the result of an effort to combat China’s economic slowdown before it becomes unmanageable.

The fluctuations in the Yuan over the past two days are ‘within a controllable range,’ stated PBOC Chief Economist Ma Jun. ‘The PBOC is fully capable of directly intervening when necessary in the foreign-exchange market to stabilize the market rate and to prevent exchange-rate fluctuations caused by irrational herd behaviour,’ Ma added.

However, many predict that the devaluation will be short-term.

‘A weak fixing two days in a row does not help stabilize sentiment, commodity currencies and Asian currencies,’ said Roy Teo, a strategist at ABN Amro Group. ‘There should be some stabilization in terms of the Yuan fix because they wouldn’t want to invite speculators or to let the market think that the direction in the currency is a one-way bet.’

The Euro to Chinese Yuan (EUR/CNY) exchange rate was trending within the range of 7.1020 to 7.1832 during Wednesday’s European session.