Yuan to stabilise in 2017, according to poll

A poll of more than 500 Chinese FX participants finds 57% expect the yuan to halt its depreciation against the greenback

Chinese yuan notes
Redback rising: only 16% of respondents predict the renminbi to weaken beyond 7.15 by the year end

The Chinese yuan is expected to stabilise at between 7.00 and 7.15 against the US dollar by the end of the year, weakening somewhat from the currently prevailing 6.88 rate in USD/CNY, according to a Bloomberg survey conducted among banking and foreign exchange executives.

Figures from a poll of more than 500 market participants from banks, brokers and corporate treasuries at the Bloomberg FX17 summits in Beijing and Shanghai show 57% of respondents think the yuan will eventually halt its depreciation trend against the greenback, settling at between 7 and 7.15 within the next nine months.

A total of 27% of participants are cautiously optimistic that the yuan will reverse its weakening path and strengthen towards 6.75–7.00 versus the dollar, while only 16% predict the currency to depreciate beyond the 7.15 level.

The consensus among forecasters contributing to FX Week is for USD/CNY to trade at 7.13 by the end of 2017.

Last year, the yuan dropped 6.6% against the dollar in its biggest one-year loss since 1994. 2017 began with the redback setting its weakest level since May 2008 – at 6.9649 – in the first week, before trading a half-percentage point higher versus the dollar in the following two months, as the so-called ‘Trump effect’ began to wane and the Federal Reserve continued its hiking cycle.

The survey results also show the US dollar to be a preferred safe bet for 2017 (63%), followed by the Japanese yen (20%), the yuan (9%) and sterling (7%). According to the survey, the Fed’s hiking path is the primary macro issue likely to affect the yuan this year, followed by China’s monetary policy, US President Donald Trump’s economic and trade policy, and China’s FX reforms. Overall, 91% of respondents said the yuan’s fluctuations are more closely tied to the US dollar than the euro.

The FX17 events and the poll are part of our continued efforts to connect China’s FX community and bring valuable insights to the market
Ee Chuan Ng, Bloomberg China

When asked about trading activity for onshore Chinese banks, only 30% of those polled believe they should expect more opportunities, while 55% predict less activity than last year.

“The FX17 events and the poll are part of our continued efforts to connect China’s FX community and bring valuable insights to the market. As international institutional investors gain direct access to China’s bond and FX markets, it is increasingly important for market participants to have greater understanding of industry sentiments,” said Ee Chuan Ng, head of Bloomberg China.

In February, China’s FX reserves rebounded above the psychological $3 trillion threshold, rising for the first time in eight months as tighter capital controls designed to stop outflows from the country started to have an impact. Since June 2016, China’s FX reserves have declined by more than $200 billion, with the total standing at $3.01 trillion in February.

 

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