The offshore yuan traded near 6.38 per US dollar on Friday and is set to end a volatile week lower, pressured mainly by a hawkish Federal Reserve. The latest Fed minutes revealed US policymakers considered quicker interest rate hikes and discussed quantitative tightening this year to tame persistently high inflation. The firm hawkish stance pushed US bond yields higher, hurting stocks and risk-sensitive currencies. Meanwhile, the People’s Bank of China is widely expected to continue easing monetary policy to cushion an economic slowdown. The yield spread between Chinese and US 10-year government bonds fell to its lowest since mid-2019 this week amid a jump in US Treasury yields, raising the risk of capital outflows and putting pressure on the yuan. Elsewhere, the PBOC-backed Financial News also warned of depreciation pressure on the yuan, attributing the weakness to shrinking yield advantages, a strengthening dollar, a narrowing trade surplus and uncertainties in global markets.
Historically, the Chinese Yuan reached an all time high of 8.73 in January of 1994. Chinese Yuan - data, forecasts, historical chart - was last updated on January of 2022.
The Chinese Yuan is expected to trade at 6.40 by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, we estimate it to trade at 6.46 in 12 months time.