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"Will the US dollar test the 7.0 level against the RMB again? We think so, but we don't expect it to last longer than 7.0." UBS pointed out in its report.
UBS believes that the USD-RMB exchange rate will stabilize in the 6.7-6.8 range in the next six to 12 months for three reasons. First, the Sino-US trade agreement will put downward pressure on the USD-RMB exchange rate. Secondly, the improvement of China's balance of payments will help to support the RMB. Third, UBS expects the dollar to weaken in the second half of 2019.
UBS believes that if the Fed cuts interest rates to address growth concerns, a full weakening of the dollar will provide more room for the central bank to manage exchange rates. The renminbi is likely to recover from recent weakness. It is estimated that the US dollar will hover around 6.7-6.8 against the RMB in the next six to 12 months. In order to manage the short-term exchange rate risk, it reiterates its hedging against the long positions of the RMB in the next three months.
UBS said that although the trend of the renminbi mainly depends on trade tensions between China and the United States and the slowdown of China's economic growth, the central bank should not look at 7.0 differently. Otherwise, the flexibility of the central bank's monetary policy will be severely limited and the effect will be counterproductive. Therefore, it is estimated that policymakers will not stick to this psychological barrier.

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