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China’s currency heads into Biden era on front foot
Renminbi’s future strength depends on cooling of US trade tensions and health of dollar
World Economy News
22 Jan 2021 • 4 min read
After years in Donald Trump’s crosshairs, China’s currency is greeting Joe Biden on radically different terms.
The renminbi, currently at a 30-month high against the dollar, has been boosted by expectations that a Democratic administration could prove less volatile in its dealings with China as well as by the country’s strong economic recovery from the Covid-19 pandemic.
A “flood” of foreign cash will chase yuan-denominated assets in 2021 because they’ll offer far better yield than the rest of the world, according to Liu Li-gang, chief China economist at Citigroup Inc. He predicts the currency could rally 10% to 6 per dollar or even more by the end of next year. The yuan hasn’t been that strong since late 1993, just before China’s unification of official and market exchange rates triggered a plunge in the currency.
The yuan has been on a tear since late May, surging to a more than two-year high as data showed that China’s economy was rebounding from the virus pandemic. Overseas funds have increased their holdings of onshore bonds and stocks by more than 30% this year to records, official data showed, prompted by index inclusions and the country’s wide interest-rate premium over other markets. To slow the advance, Beijing has made it cheaper for traders to bet against the yuan and has relaxed capital curbs to allow more outflows.
Economist predicts yuan at 6 per US dollar by end 2021 thestandard.com.hk - get the latest breaking news, showbiz & celebrity photos, sport news & rumours, viral videos and top stories from thestandard.com.hk Daily Mail and Mail on Sunday newspapers.
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