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Free AccessMNI DATA TABLE: MNI China Interbank Liquidity Index (Jun) - 3
MNI DATA TABLE: MNI China Interbank Liquidity Index (Jun) - 2
MNI EXCLUSIVE: Yuan Depreciation To Slow, May Reverse:Advisors
By Wanxia Lin
BEIJING (MNI) - The pace of yuan depreciation should slow, and perhaps
reverse, in coming months, as it finds support from economic fundamentals,
government advisors told MNI, arguing that a weaker currency would not be in
China's interests.
Yu Miaojie, a veteran trade expert advising several government departments,
said dollar-yuan, which traded above 7.14 on Friday, will not breach 7.3, and is
likely to bounce back to 6.9 within six months.
"The dollar could weaken if the U.S. economy deteriorates in Q4 under the
impact of inflation driven by tariff hikes," said Yu. Also deputy dean of the
National School of Development at Peking University, Yu said China should allow
the yuan to fluctuate according to market forces and that a strong currency
would enhance the country's image.
Zhang Huanbo, deputy director of the U.S.-Europe Research Institute,
expected the yuan to stabilise once it reaches what he said was support around
7.2, after which it could then appreciate, depending on the progress of trade
talks with the U.S., and on the relative performance of China's economy.
"Dollar-yuan is on the verge of reaching the support level within half a
year," said Zhang, also a macro-economy researcher at the China Center for
International Economic Exchanges, a think tank managed by the National
Development and Reform Commission.
Mei Xinyu, a researcher at Chinese Academy of International Trade and
Economic Cooperation affiliated with the Ministry of Commerce, said it was hard
to say at what level the yuan would find support. But the People's Bank of China
will not allow a large depreciation, which could lead to defaults by companies
with dollar-denominated bonds, he said.
"Policymakers will be more prepared to allow the yuan to fluctuate within a
wider range," Mei added.
Increased capital outflow might outweigh any benefits to exporters from a
cheaper yuan, said Zhang. Beijing would not deliberately devalue, despite the
U.S. move to label the country a "currency manipulator," he said.
"A stronger yuan will be conducive to the internationalisation of the
currency," Zhang added.
The onshore yuan fell to levels not seen since February 2008 this week,
closing at 7.1452 on Friday, taking its August fall against the dollar to 3.78%
against the dollar, the most in a monthly since 1994.
--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com
--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com
[TOPICS: M$A$$$,M$Q$$$,MT$$$$,MX$$$$,MGQ$$$]
To read the full story
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.