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Investment banks cut yuan forecasts after April review

With Winni Zhou and Alun John

SEANCHAI/HONGCong – Major investment firms are cutting back on their forecasts for the yuan for the second time in just three weeks, as the Chinese currency has declined sharply recently after taking into account previous revisions, which surprise many.

Triple impact of slower growth, associated economic shocks COVID-19 and the aggressive tightening of the US Federal Reserve have put downward pressure on the yuan, with Chinese authorities appearing to stand on the sidelines to allow their heavily controlled currency to fall further.

The yuan’s spot rate has fallen more than 6% against the dollar over the past four weeks and stood at 6.7992 per dollar on Monday, surpassing the year – end average of 6.71 forecast by a survey that was conducted among nine banks at the end of April.

Some banks are now expecting the yuan to fall to 6.9 or even hit the 7 hurdles before the end of the year, unprecedented levels from the first phase of the 2020 pandemic.

HSBC he said in a note that the currency has suffered, “especially in the context of China’s slowing economy and sustained steady aggression.”

“These are not new developments per se either, but things have become more difficult, which we think our forecasts need to be considered.”

HSBCwhose forecasts have cut the yuan for the second time in three weeks, the yuan is now expected to trade at 6.75 against the dollar at the end of the second quarter, before rebounding to 6.70 at the end of the third quarter, against 6.60 and 6.62 from your previous review.

A survey of nine banks in late April predicted that the yuan would be at 6.63 per dollar at the end of June, according to the median forecast. The majority of those surveyed expected the yuan to fall further to 6.71 by the end of the year.

However, given the recent fall in the yuan, which has taken it to its lowest level in almost 20 months and is an unusual turnaround for a currency that normally trades within a narrow range, there are many analysts have given many analysts further weakness. [CNY/]

A weaker-than-expected set of April economic data released on Monday and last week, including lending, retail sales and industrial production, reaffirmed market sentiment as the second-largest economy on a world in front of ones that are growing like greenery. COVID-19 invoices pass. [L6N2X803M]

“The IS USD/CNY May rise rapidly to 7 if the situation COVID China’s soil is deteriorating with a further lock – up which severely disrupts the supply chain, “Barclays said in a note.

However, the bank also pointed out that the yuan could slip back quickly if authorities intervened to support the currency or strengthen the economy.

“The risk below comes from the People’s Bank of China (PBOC) leans aggressively against further weakness of the CNY and a sharp fall in the dollar than we expected; risk perception may also drive the CNY in the case of a huge stimulus. In this case, the USD/CNY could quickly experience 6.70 ″.

Barclays lowered its forecast for the yuan to 6.9 per dollar at the end of the second quarter, from 6.3 previously, to take into account stronger dollars and foreign capital outflows.

Other banks such as Mizuho Bank and UBSalso cut their forecasts for the yuan to reflect the bearish mood.

Ken Cheung, chief Asian currency strategist at Mizuho Bank, cut its year – end forecast for the yuan for the second time on Monday, from 6.6 to 6.7.

Wang Tao, chief economist for China at UBSrevised its forecast for the year – end yuan to 6.9 from 6.6 previously.

“The IS USD/CNY may exceed level 7 before the end of the year due to the strength of the USD and a likely weakening of Chinese exports and the economy in general, but it should settle below 7 by the end of the year, ”he said.

“The reason for this is that we are looking forward to the economic impact of the COVID decline in the second half of the year, with growth momentum picking up and market confidence improving.

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