Yuan expected to hold steady
▶ Currency may wobble in reaction to trade talks
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.