Arjen van Dijkhuizen, senior economist at ABN AMRO, suggests that after last year, a 10% depreciation of the yuan versus USD helped to mitigate the impact of US tariffs, but since the recent re-escalation the Chinese authorities have acted to keep yuan weakness contained.
“The US Treasury has again not declared China a ‘currency manipulator’ in their recent bi-annual report on foreign trade partners’ exchange rate policies. We are still of the view that Beijing will refrain from using a weaker yuan as a weapon in the trade conflict, partly because a sharp CNY depreciation could trigger a surge in capital outflows (as it did back in 2015-16).”
“Still, the risk is increasing that they will allow some more yuan weakness should the US indeed step up tariffs on Chinese imports further. We have revised our USD-CNY forecasts for end 2019 and end 2020 a bit, to 6.90 and 6.70 respectively (both from 6.60).”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.