The Chinese renminbi, or yuan, is expected to see a prolonged trend of strengthening against the U.S. dollar amid forecasts that the Federal Reserve (Fed) may start to lower interest rate, said a Chinese expert in an interview with China Global Television Network (CGTN) on Thursday.
As of Friday, the central parity rate of the Chinese yuan has strengthened 11 pips to 7.1449 against the U.S. dollar, according to the China Foreign Exchange Trade System.
"I think we have to keep in mind that the yuan has been experiencing a devaluation for a very long time, for a very long time. I remember it has depreciated (against the U.S. dollar) from, you know, 6.5, something less than 6.5, all the way to close to 7.3. That's a very significant depreciation. And now we start to see that the tide may be turning in a very significant way as the rate in the United States is starting to decline. So, I think we are probably seeing the very beginning of a fairly prolonged trend of yuan strengthening in my view. So, I think this is really the tipping point at this time. And I would expect that, aided with the very encouraging news on the export sector, on the trade surplus dimension, I would expect that the yuan would further appreciate for a little bit more, maybe breaking the seven point mark, in my view," said John Gong, economic professor of China's Economics, University of International Business and Economics.
Experts believe the yuan's appreciation has been driven by market expectations that the Fed may start to lower interest rate in September, and the less-than-expected U.S. economic data in manufacturing PMI and unemployment rate.
The appreciation of yuan is also closely related to the recent strong rebound in Asian currencies such as the yen, as some insiders hold. But with China's domestic policies starting to take effect and the landing of Fed's rate cut, sharp unilateral appreciation may seem less likely.
Chinese yuan to see prolonged trend of strengthening: expert
