See Gains in China’s RMB Yuan on Improving Economy

See Gains in China’s RMB Yuan on Improving Economy

$CNY, $USD, $GS

FLASH: The RMB Yuan’s rally has more room to run as China’s economic recovery picks up

The currency will advance about 1.5% to 6.6 a USD in the next 12 months, says the Chief China economist at Goldman Sachs in Hong Kong. That is more Bullish than Goldman’s 6.7 forecast in January.

‘The economy will show solid signs of recovery,’ he said, citing stimulus measures rolled out since last year and a pick-up in infrastructure investments as reasons economic expansion will get a boost in the coming months.

Early indicators have flashed the 1st signs of an economic recovery after months of slowdown, and China’s credit growth surged to a record in January.

The People’s Bank of China (PBoC) cut lenders’ RRR (reserve requirement) 5X since the start of Y 2018 in a bid to boost growth.

Other watchers say, China will keep the RMB Yuan basically stable at reasonable levels and will increase the flexibility of the exchange rate, the nation’s top economic planner said in report released Tuesday during the National People’s Congress in Beijing.

The RMB Yuan has risen 2.6% in 2019 as the best-performing currency in Asia, after falling more than 5% last year. It rose 0.13% to 6.7016 a USD as of 5:36 p.m. in Shanghai Tuesday.

More on the RMB Yuan and the Chinese economy:

  • The currency will trade at 6.65 a USD in 3 months; other factors supporting it are the central bank ensuring a stable exchange rate and trade talks with the US stoking investor optimism
  • The PBoC may manage the RMB Yuan with a stronger bias in daily fixings if policy easing triggers depreciation
  • Slower growth in exports, consumption and companies’ capital expenditures will continue to be a drag on the economy
  • The PBoC will aid growth by injecting cash in its daily open-market operations and cut lenders’ reserve requirement once in Q-2.
  • The PBoC will not reduce the benchmark interest rate, but will guide the money market rates lower; the weighted average seven-day repurchase rate will stand at 2.25% by the end of Q-2
  • China will see more capital inflows into stocks and bonds due to global index inclusions; the authorities may rein in appreciation by easing capital controls, if inflows are too strong

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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