HSBC highlight two continuing headwinds that'll drive the Chinese yuan even lower

<p>HSBC say that CNY could face more headwinds from </p><ul><li>China’s persistent run of weak data </li><li>and further widened yield disadvantage</li></ul><p>And that People's Bank of China efforts to prop up the yuan are half-hearted:</p><ul><li>The PBoC may continue to smooth volatility, but we do not expect it to draw a firm line in the sand when the tide keeps coming in.</li></ul><p>Also on the PBOC, the path is clear for rate cuts next Monday:</p><ul><li>The PBoC unexpectedly lowered the rate on its one-year loans, or medium-term lending facility (MLF), by 15 bps to 2.5%, together with a reduction of 10 bps in its 7-day reverse repurchase rate (a short-term policy rate) to 1.8%. </li><li>The rate cut opens room for a reduction in 1-year or even 5-year loan prime rates on 21 August.</li></ul><p>—</p><p>ICYMI on the MLF cut:</p><ul><li><a href="https://www.forexlive.com/news/forexlive-asia-pacific-fx-news-wrap-china-cuts-rates-data-disappoint-yuan-intervention-20230815/" target="_blank" rel="follow" data-article-link="true">ForexLive Asia-Pacific FX news wrap: China cuts rates, data disappoint, yuan intervention</a></li></ul><p>—</p><p>For today, still to come:</p><ul><li><a href="https://www.forexlive.com/centralbank/pboc-is-expected-to-set-the-usdcny-reference-rate-at-73047-reuters-estimate-20230817/" target="_blank" rel="follow" data-article-link="true">PBOC is expected to set the USD/CNY reference rate at 7.3047 – Reuters estimate</a></li></ul><p>Offshore yuan update:</p>

This article was written by Eamonn Sheridan at www.forexlive.com.