UBS raised forecast of China’s 2023 GDP growth to at least 5.7%, said USD/CNY could hit 6.5 by year-end
MACRO VIEWS & ANALYSIS
UBS raised forecast of China’s 2023 GDP growth to at least 5.7%, said USD/CNY could hit 6.5 by year-end
MACRO VIEWS & ANALYSIS

UBS raised forecast of China’s 2023 GDP growth to at least 5.7%, said USD/CNY could hit 6.5 by year-end

 

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UBS raised the forecast of China’s GDP growth in 2023 to at least 5.7%, citing better-than-expected recovery in consumption in the first quarter of the year.

The divergent growth and interest rate trends in the US and China would be the main drivers of the USD/CNY and that has yet to fully reflect these factors and could fall towards 6.5 by the end of the year, according to a report from UBS Chief Investment Office of Wealth Management for APAC.

With economic momentum further strengthening after the May Day holiday, the yuan will be able to maintain a steady appreciation trend, it said.

The bank noted market concerns that as outbound travel becomes easier, China’s trade surplus may top out to the detriment of the yuan, but the bank believed that it’s not sufficient to justify bearishness on the currency, as the US rate hike cycle is nearing its end and the next policy focus will shift from fighting inflation to supporting the banking system and the economy, which will partially reduce the support of high interest rates on USD/CNY.