Chinese yuan likely to break through 7 per dollar mark before returning to current level by end of year – UBS
FOREX VIEWS & ANALYSIS
Chinese yuan likely to break through 7 per dollar mark before returning to current level by end of year – UBS
FOREX VIEWS & ANALYSIS

Chinese yuan likely to break through 7 per dollar mark before returning to current level by end of year – UBS

 

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The Chinese yuan recently depreciated below 6.9 per US dollar as the greenback climbs and the Chinese currency will likely weaken below 7 per dollar before returning to the current level by the end of this year, which means the risks of further yuan depreciation remains under control, UBS said in the latest note.

Though interest rates on the long-term US government bonds jumped above that of China, there is no need to overly worry about the risk of yuan depreciation as China still has a significant trade surplus and the ability to control capital outflows, the bank said.

The onshore yuan closed the daytime trading at 6.8990 per the dollar on Thursday, strengthening 85 pips from the previous day. The Chinese currency has depreciated more than 8% against the US dollar so far this year, as the US Federal Reserve continues to hike interest rates to contain runaway inflation.

UBS’s growth forecast for China’s 2022 GDP growth remains at 3%. With the Covid-19 situation easing and more stimulus policies introduced, China’s economy is likely to improve significantly in the second half of the year from the second quarter, but some policy effects may be delayed until the fourth quarter, according to the bank.

China still has room to introduce more policies, such as cutting the loan prime rate further to boost the recovery of the real estate sector, and keep expanding its investment in infrastructure at a high rate of 10% to 12%, it predicted.