(Yicai Global) March 29 -- This year will not see a collapse in the value of the yuan against the US dollar, which is expected to reach 6.9 yuan by the end of June, predicted Shen Jianguang, chief economist at Mizuho Securities Asia Ltd.
Barring major trade wars between China and the US, the yuan could slightly weaken to 7.1 against the dollar by the end of this year within the range of 6.9-7.3, the foreign media quoted Shen as saying.
The strong gains in the dollar are difficult to sustain, Shen pointed out. The dollar index, which is at an eight-year high, is unlikely to rise substantially and is expected to stand at 100-110 this year. The dollar has fallen in the wake of the March interest rate hike by the US Federal Reserve. Looking ahead to the full year, the Fed is likely to deliver another two rate rises. The Fed’s seven rate hikes since the 1970s show that the dollar will not necessarily strengthen after each hike. It is very likely to weaken.
Chinese Prime Minister Li Keqiang said for the first time that the yuan’s position in the global currency system should be stable, which is an even higher requirement than a stable yuan, meaning controls aimed at preventing a steep decline in the yuan will remain effective. This year’s tighter domestic monetary policy compared with last year and improved fundamentals are also expected to help keep the yuan’s exchange rate stable.