NewStanchart revises down forecast for yuan’s value versus dollar in 2015
“The authorities are likely to pay greater attention to the CNY’s trade-weighted value and to resist new gains given subdued regional trade dynamics"
Standard Chartered has sharply revised down its forecast on the Chinese yuan’s value against the US dollar in 2015, on speculation Beijing may be reluctant to allow its currency to continue strengthening amid subdued regional trade.
The bank had expected the onshore yuan, or the so-called CNY, to trade at 5.97 against the US dollar by the end of this year, representing a 3.7 per cent gain for the full calendar year. It now forecasts the currency to gain only 1.4 per cent for 2015 to stand at 6.12 by year-end.
For the offshore yuan, the renminbi that is circulating outside of mainland China called CNH, the bank is now expecting the note to trade at the same level as the CNY by year-end, meaning that the full-year gain to stand at 1.7 per cent.
That also means the gap between the onshore and offshore paper, which had been a key incentive for foreign capital to buy yuan and do arbitrage trades, will disappear by the end of this year.
“The authorities are likely to pay greater attention to the CNY’s trade-weighted value and to resist new gains given subdued regional trade dynamics,” the bank said in a report on Monday.
“We now forecast mild CNY depreciation relative to the USD in first half of 2015, before a resumption of appreciation in the second half as the USD weakens and China benefits from strengthening domestic and global growth,” the bank said.