seach-icon
  • user-img

    QONEQT in News

    05-Sep-2022 10:36 AM


    thumbnail

    Investment banks rush to cut yuan forecasts, 7 per dollar at risk

    SINGAPORE : Major investment houses have cut their yuan forecasts as its fall against the dollar accelerates, with some expecting a breach of the 7-per-dollar milestone before next month's politically sensitive Party Congress despite authorities' efforts to slow the slide.

    The yuan weakened 2.7 per cent to the dollar in the past three weeks, reaching a two-year low of 6.9350 on Monday, and is down more than 8 per cent year to date, pressured both by the dollar's global strength and by China's worsening economic slowdown.

    A quick break through 7 per dollar - breached only twice since the global financial crisis of 2008 - could stoke fears of capital outflows just as the authorities want to marshal resources to revive the economy, which is reeling from COVID-19 outbreaks and a weak property market.

    It could also be an unwelcome distraction for leaders gathering from Oct. 16 for the Party Congress, held once every five years, although some analysts expect the authorities eventually to accept more yuan weakening.

    "Over the three-month horizon, we expect policymakers to have higher tolerance for CNY depreciation as by that time the 20th Party Congress will have concluded and a weaker currency could help reduce headwinds to export growth," Goldman Sachs said in a note.

    Goldman Sachs and ANZ believe the 7-per-dollar mark will not be breached until after the Party Congress.

    But others, including Nomura, MUFG and SEB, also see a chance for the yuan to hit the key threshold this month.

    Market analysts widely believe the People's Bank of China's (PBOC) unexpected cuts to key interest rates in August speeded up the yuan's fall, reaffirming Beijing as a global monetary policy outlier while most other major economies are tightening policy to tame inflation.
    Source: CNA