Why China’s yuan is forecast to extend gains against the US dollar through 2025
A resilient domestic economy and US debt fears could see the Chinese currency appreciate further, analysts say
On Tuesday, the People’s Bank of China set its daily reference rate at 7.1534 per US dollar – strengthening from Monday’s 7.1656, and the strongest level since early November.
In June, the onshore yuan appreciated by 0.41 per cent against the greenback, bringing its cumulative gains to 1.2 per cent for the second quarter and 1.86 per cent for the first half of the year.
“Compared to late April, onshore clients have turned less bearish on China’s near-term growth outlook, as macro data has been more resilient than previously feared so far this year, despite notable divergence between exports and domestic demand,” Goldman Sachs analyst Lisheng Wang wrote in a note on Sunday.
At the same time, investors have grown increasingly concerned about the sustainability of US government debt, expecting the dollar to further depreciate amid fading confidence in US exceptionalism, loose fiscal policies and rising long-term financing costs, Wang added.
The Wall Street investment bank forecasts the yuan to strengthen further, breaking the 7 per dollar level in six months and 6.9 in 12 months.
The Chinese currency has experienced significant volatility this year, sliding to its weakest level at 7.3506 on April 9 – when tit-for-tat tariffs between Beijing and Washington escalated, pushing duties to more than 100 per cent on both sides.