(Yicai Global) April 22 -- The onshore Chinese yuan has softened over 1.5 percent against the US dollar in the past three days, standing at 6.47 at midday China time, and is likely to depreciate further to 6.65 by the end of the year, analysts said.

The offshore yuan rate against the greenback, which better reflects the expectations of international investors, has devalued 1.75 percent since April 19, reaching 6.49 at 2.00 p.m. China time.

6.4 is an important threshold for the yuan-dollar exchange rate, investment bank China International Capital Corporation said in its latest research report. The redback rising above this benchmark may kick off a new round of market concerns about the exchange rate.

The yuan faces short-term pressure to depreciate amid a global economic downturn and a slowdown in the growth of exports, but the pressure is manageable, Beijing-based CICC said. The yuan rate is returning towards long-term equilibrium and is likely to reach 6.65 against the US dollar by year end, it said.

The US Dollar index has been rising since the start of April due to expectations that the US Federal Reserve will hike interest rates and as energy prices stay high. The weakening of the yuan also has to do with importers buying more foreign exchange and with variations regarding the balance of payments, CICC added.

The high trade surplus since the start of the Covid-19 pandemic may not last long, while the pressure from the outflow of short-term cross-border securities investments will increase amid the rapidly narrowing and even reversed China-US yield spread, it said.

The latest round of Covid-19 outbreaks took place in China’s key economic hubs and spread very fast, triggering concerns globally about the country’s supply chains, Citic Securities said in a recent report.

The economic prosperity indexes of the Eurozone and the US have slumped due to pressure resulting from high inflation and tightening monetary policy, and as a result, overseas demand for products has dropped, fueling concerns for China’s exports, it added.

Editor: Kim Taylor