Yuan ex­pected to hold steady

▶ Cur­rency may wob­ble in re­ac­tion to trade talks

Global Times - - FRONT PAGE -

The yuan is un­likely to break be­yond seven against the US dol­lar by the end of this year, de­spite pre­vi­ous mar­ket wor­ries over its de­pre­ci­a­tion against dol­lar, an eco­nom­ics ex­pert said Thurs­day.

But he cau­tioned that the yuan will likely “wob­ble” in the short term as it re­acts to news about the sta­tus of the China-US trade talks as they pro­ceed.

On Thurs­day, the yuan’s cen­tral par­ity ex­change rate fell by 123 ba­sis points to 6.8599 against the US dol­lar, ac­cord­ing to sta­tis­tics from the Peo­ple’s Bank of China, China’s cen­tral bank.

The cor­rec­tion came as the yuan surged strongly on Wed­nes­day and Tues­day. On Wed­nes­day, the yuan’s ref­er­ence rate against the US dol­lar rose by 463 ba­sis points to 6.8476, the high­est since Septem­ber 25.

On Tues­day, the yuan’s ref­er­ence rate against the US dol­lar was set at 6.8939, up by 492 ba­sis points, PBC data shows.

The yuan’s ex­change rate rose af­ter the US and China re­cently an­nounced a 90-day truce in their trade dis­pute, af­ter the two coun­tries’ top lead­ers had a meet­ing dur­ing the G20 sum­mit in Ar­gentina.

Zhou Yu, di­rec­tor of the research cen­ter of in­ter­na­tional fi­nance at the Shang­hai Academy of So­cial Sciences, told the Global Times on Thurs­day that the yuan’s ap­pre­ci­a­tion is partly a re­ac­tion to the slump of the green­back af­ter the 90-day trade truce was an­nounced.

He nev­er­the­less stressed that the yuan’s ap­pre­ci­a­tion in the past sev­eral days had been a lit­tle “too much.”

“One rea­son might be that the yuan had de­pre­ci­ated too much amid the trade dis­pute. Now that a sig­nal has sud­denly been re­leased that the two coun­tries’ trade re­la­tions may im­prove, the mar­ket showed ex­cep­tion­ally strong mo­men­tum for a re­bound,” Zhou said.

“Be­fore the 90-day truce ends and the fi­nal out­come is out, I think the yuan’s de­pre­ci­a­tion trend will ease in gen­eral as the mar­ket has high hopes for con­sen­sus to be reached be­tween the two economies,” Zhou said.

He also agreed that it is un­likely the yuan would break be­yond seven against the US dol­lar by the end of the year. The yuan stood at 6.5079 against the US dol­lar on Jan­uary 2, the first trad­ing day of 2018.

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