Analyst predicts rise of the Chinese yuan in the Forex market. Thus, with the increase in positive expectations of the yuan from investors, the future for the Chinese currency is positive.
The Coronavirus was born in China. And from the first moment the disease began to spread, the authorities in the country quickly implemented blockade measures. Well, its purpose was to stop the spread of the disease. This hurt the economy in the process.
But now that the Coronavirus has been controlled in China, investor enthusiasm for the currency has improved markedly.
Zach Pandl and his predictions about the yuan
The Chinese yuan will see a considerable appreciation against the dollar in the next 12 months. This according to Zach Pandl, co-director of global change, rates and emerging market strategy at Goldman Sachs.
Zach, building on trends seen in the past two weeks, explained that the yuan has been steadily rising. Thus, Pandl predicts the yuan’s rise in the following weeks.
After the Coronavirus shock, you can see a gradual rise in the local economy. The Chinese yuan has traded in its highest ranges since the risk environment for COVID-19 decreased. Well, the Chinese domestic scene is seen with solid foundations, Pandl considered.
Pandl forecasts that the yuan could hit 6.70 to the dollar in the next 12 months. “Mainly through the health of the Chinese economy that has been recovering faster than expected”he expressed.
The only factor holding the yuan back, and preventing investors from feeling enthusiasm about the currency, is the mounting economic and political tensions between the United States and China. And as the November elections in the American country approach, the uncertainty grows.
Good figures for the Asian currency
Following Pandl’s projections in his interview with CNBC, data released on Tuesday showed that China’s exports and imports increased in June.
Other recent data releases have also pointed to the increase in Chinese manufacturing activity. Specifically, the official indexes for June, showing an expansion in the sector.
In addition, it considers that the behavior of the dollar, although it could continue negative for a period, will increase at some point, as it is part of its performance in the Forex market.
Fall risk for the Chinese currency?
Analyzing downside risks to the yuan, Pandl said there were two factors he was focused on.
The first was the overall pandemic situation, said the strategist.
“I think we must recognize that the US dollar has been a safe haven since the start of the pandemic. And it tends to go against almost all currencies when the world economy is in periods of transition ”Pandl said.
“If it is discovered that the virus is not really under control, it will return to a double-dip recession … that would be a major risk for all currency forecasts.”, added to the concerns of the interviewers.
The second factor Pandl cited was the relationship between Beijing and Washington before the November elections in the United States.
“President Trump has expressed his opposite stance on Chinese politics from a variety of fronts and that could lead to even more drastic political measures.”Zach said.
When asked what might happen if former United States Vice President Joe Biden were elected in November, Pandl explained that he does not believe that Biden will approach the bilateral relationship from another perspective, but that he will have different tactics.
With Biden appearing to “view tariffs as less of a correct policy,” Pandl said there is a “greater chance” that the tariffs imposed in the midst of the US-China trade war will be revoked if the former vice president is elected. This could be positive for the Chinese yuan.
Quote of the Chinese yuan to date
At the time of writing, the yuan is quoted at its USD / CNY pair of $ 6.9912. The currency scored $ 6.9973 per dollar for the yuan, as of Wednesday morning, Singapore time, being its highest range in recent weeks.
In summary, the Chinese currency promises to maintain its good performance and the Chinese yuan is predicted to rise in the Forex market, as investor enthusiasm seems to improve as the Asian giant’s economy stabilizes markedly.
Pandl mentioned that once tensions with the United States subside, and the pandemic situation takes a back seat, the Chinese currency will perform better.
The information in this content has been extracted from reliable sources detailed below:
1- Professional handling of content by the authors of CriptoTendencia.
2- External sources: CNBC.