BENGALURU- The Chinese yuan will slip by year-end to deeper lows last hit against the US dollar during the 2008 global financial crisis as the authorities nudge the partly managed currency down while the US-China trade war rumbles on, a Reuters poll showed.
With global uncertainties aplenty and a US election year approaching, any possible resolution to the trade war at next week’s talks will be hampered by signs of a weakened yuan. Chinese markets are closed until Oct. 7 for public holidays.
To counter losses from the trade war and regain export competitiveness, the People’s Bank of China has consistently set the yuan’s mid-point rate above the key 7 per dollar rate, allowing it to fall about 2 percent after Washington labeled it a currency manipulator in August.
The Sept. 24-Oct. 3 poll of over 60 foreign exchange strategists showed the yuan will be about 1 percent weaker at a more than decade-low of 7.20 against the dollar by end-2019.
It closed Monday at 7.15.
The currency is forecast to hover around the same rate by March 2020 and then appreciate to 7.16 per dollar by this time next year.
“The yuan is being held up by string, bogies and glue. The trade war is going to get worse,” said Michael Every, head of financial markets research, Asia-Pacific at Rabobank, who was the most pessimistic forecaster for the 12-month horizon at 7.75, not seen since early 2007.
“There will be more downward pressure on the yuan and when that happens. It is bad news for all emerging market currencies.”
Analysts were divided on expected moves in US-China trade relations, with over 60 percent anticipating further deterioration or a continuation of the status quo and the rest forecast an improvement.
Forecasts for where the yuan will trade in a year were divided too, with 31 of 60 respondents expecting it to weaken further and 29 respondents seeing the yuan gaining from here. — Reuters