Deutsche Bank says the Chinese yuan is still cheap versus the euro despite recent gains, signaling further appreciation potential.
Deutsche Bank released a note arguing the yuan remains cheap against the euro even after a recent gain, implying the cross rate may decline as the yuan strengthens toward fair value.
The bank's view that the yuan is still undervalued suggests EUR/CNY could decline as the yuan strengthens toward fair value.
While the article doesn't specify, recent yuan gains may stem from improved trade data or policy support, but the bank sees it as insufficient.
Deutsche Bank's analysis implies medium-term upside, but external factors like US tariffs or global risk sentiment could offset.
Deutsche Bank's latest note highlights the yuan's persistent undervaluation against the euro, even after a period of appreciation. The bank's analysts suggest the currency has further room to run, implying additional losses for EUR/CNY. The call adds to a mixed outlook for the yuan, which faces headwinds from US tariff threats but support from China's trade surplus.
The bank likely points to valuation metrics such as purchasing power parity, showing the yuan trades below its long-run fair value versus the euro.
Many analysts see the yuan as broadly fairly valued against a basket, but the euro cross may reflect euro strength or specific Chinese economic factors.
A persistently undervalued yuan could raise concerns about export competitiveness, though the PBOC allows gradual adjustment.