Yuan likely to drop below rate of seven to US dollar within three months, state-owned lender Bocom International says
- Forecast based on positions built by foreign-exchange traders
- Central bank has no intention of softening currency to fight trade war
The yuan is likely to drop below the level of seven yuan to a US dollar within three months, and the stock markets in mainland China and Hong Kong are gradually pricing in this scenario, Chinese state-owned lender Bank of Communications International said on Wednesday.
Hong Hao, the bank’s head of research, said: “The three-month tenure estimate is basically based on the positions we can see built by foreign-exchange traders for now. A weakened valuation of the yuan is decided by the recent tough trade environment China is facing.”
China faces rising tariffs imposed by the Trump administration, and last week the governor of its central bank, the People’s Bank of China, Yi Gang, said there was no “red line” for the exchange rate of the yuan against the US dollar.
This statement triggered fresh speculation among investors about Beijing’s willingness to weaken its currency to offset US tariffs.
Analysts including Hong, however, said they believed the Chinese central bank had no intention of sharply weakening the currency, especially since trade talks between Washington and Beijing were still ongoing.
