MNI BRIEF: China Yuan Supported By Exports, Short Swing Sees

The yuan will be supported by robust exports and capital inflow in domestic bond market in H2, while the pace of Federal Reserve’s rate cut and geopolitical risks may cause unexpected volatility in foreign exchange market, according to Q3 Economic and Financial Outlook published by Research Institute of Bank of China on Wednesday.

The yuan is expected to rise to near 7.0 against the greenback as of the end of 2024, and the kick-off of a rate-cutting cycle of the European Central Bank's will reduce the spillover effect of high interest rate in developed economies, which will benefit the yuan, the report said. (see:MNI: China Yuan Seen Breaching 7.3, Strengthening Against Basket)

In addition, analysts at the BOC suggest the PBOC should further increase the scale of the affordable housing relending tool from the current CNY300 billion in a bid to boost property sector. The real estate market is still undergoing a deep adjustment even though the recent measures taken by the authorities to bail out the sector has helped slight recovery in core cities, the report said, warning further debt defaults of certain developers need to be highly watched.