Analyst Predicts Rise in Chinese Yuan in Forex Market. With the increase in positive expectations for the yuan by 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 blocking measures. For their 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 dramatically.
Zach Pandl and his predictions about the yuan
The Chinese yuan will see considerable appreciation against the dollar over the next 12 months. This according to Zach Pandl, co-head of global exchange, rates and emerging market strategy at Goldman Sachs.
Zach, based on the trends observed in the last two weeks, explained that the yuan has been rising steadily. As such, Pandl predicts that the yuan will rise in the coming weeks.
After the Coronavirus shock, a gradual recovery of the local economy can be seen. The Chinese yuan has been trading in its higher ranges since the risk environment for COVID-19 decreased. For the Chinese domestic scene is seen to have solid foundations, Pandl considered.
Pandl forecasts that the yuan could reach 6.70 per dollar in the next 12 months. „Mainly through the health of the Chinese economy which has been recovering faster than expected,“ he said.
The only factor holding back the yuan, and not allowing Bitcoin Circuit investors to get excited about the currency, is the increasing economic and political tensions between the United States and China. And as the November elections in the U.S. approach, uncertainty is growing.
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Good figures for the Asian currency
Following Pandl’s projections in his interview with CNBC, data released Tuesday showed that China’s exports and imports increased in June.
Other recent data releases have also pointed to increased Chinese manufacturing activity. Specifically the official June indices, showing an expansion in the sector.
In addition, he believes that the dollar’s behavior, although it could remain negative for a period, will rise at some point, as it is part of its performance in the Forex market.
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Risk of falling for the Chinese currency?
In analyzing the downside risks to the yuan, Pandl said there were two factors he was focused on.
The first was the overall pandemic situation, the strategist said.
„I think we should recognize that the U.S. dollar has been a safe haven since the beginning of the pandemic. And it tends to go against almost every currency when the world economy is in transition,“ Pandl said.
„If you find that you don’t really have the virus under control, you will go back into a double-dip recession … that would be a major risk for all currency forecasts,“ he added, in response to interviewers‘ concerns.
The second factor Pandl cited was the relationship between Beijing and Washington before the November U.S. elections.
„President Trump has expressed his opposition to Chinese policy from a variety of fronts and that could lead to even more drastic policy measures,“ Zach said.
Asked what might happen if former U.S. Vice President Joe Biden were elected in November, Pandl said he does not believe Biden will take a different approach to the bilateral relationship, but that he will have different tactics.
With Biden appearing to „view tariffs less as a correct policy,“ Pandl said there is a „greater likelihood“ that tariffs imposed in the midst of the U.S.-China trade war would be revoked if the former vice president is elected. This could be positive for the Chinese yuan.