MNI BRIEF: Yuan Likely To Return To 6.5-6.8 Against Dollar

The Chinese yuan is very likely to return to the level of 6.5-6.8 against the greenback this year with the recovery of the U.S. economy, YiCai.com reported citing Liang Ming, director of the Institute of International Trade, a research unit under the Ministry of Commerce.

With the U.S. President-elect Joe Biden successfully taking office on Jan. 20, the U.S. economy should gradually return to its normal state if Biden can prioritize boosting the domestic economy, fighting the Covid-19, and saving jobs as he has promised. And if the U.S. is equipped with some long-term economic policies, there may be a backflow of dollars.

Liang said that China should remain highly guarded against such a trend which will cause big impacts on the Chinese equity and foreign exchange markets, and drive safety-seeking capital and hot money to leave China on a large scale in the short term.

Although it is possible for the yuan to hit 6.2 against the dollar at some point, the currency would not continue to appreciate sharply and would gradually return to an equilibrium level of 6.8, 6.9 or 7against the dollar in the longer term, he said.