China's Yuan Strengthens Again This Year... May Fall to 6.1 Yuan per Dollar
Possibility of Additional Appreciation Due to 8% Economic Growth and Strong Exports This Year
Financial Authorities May Manage Exchange Rates Considering Negative Impact on Exports
[Asia Economy Beijing=Special Correspondent Jo Young-shin] There is a forecast that the Chinese yuan could fall to 6.1 yuan per dollar.
Sun Zhenguang, Chief Economist at JD Digital Technology, recently wrote in an article for the Chinese economic media Caixin that the yuan-to-dollar exchange rate could drop to 6.1 yuan by the end of the year. The benchmark exchange rate announced by the People's Bank of China on the 7th was 6.4391 yuan per dollar.
The previous day, in the Hong Kong offshore market, the yuan-to-dollar exchange rate fell to 6.3960 yuan during trading, marking the highest yuan value in more than two years since June 2018.
Due to the intensification of US-China conflicts and the spread of COVID-19, the yuan-to-dollar exchange rate rose to the 7 yuan level in May last year, but it has steadily declined since June last year when China's economic recovery began in earnest. The yuan's value surged nearly 7% last year.
Economist Sun said, "With China's economy expected to grow in the 8% range this year thanks to the base effect, exports continuing to perform well, and the US-China interest rate differential remaining, the yuan is likely to appreciate further."
However, he also noted that rapid yuan appreciation could negatively impact China's export competitiveness, so Chinese foreign exchange authorities might intervene to manage the exchange rate.
Economist Sun added, "While the yuan exchange rate volatility is expected to increase in 2021, the probability of the exchange rate falling below 6 yuan per dollar is low."
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Meanwhile, Wang Tao, Chief China Economist at UBS, predicted in a Caixin article that the yuan-to-dollar exchange rate will move around the 6.5 yuan level this year.
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