USD/CNY: Yuan to see further gains in the Year of the Ox – CIBC

FXStreet Team FXStreet

China has entered the Lunar Year of the Ox. Though after an uncertain year in 2020 and with markets already setting up for a better 2021, might the Year of the Ox be another positive one? Details of the fourteenth five-year plan and the centenary of the founding of the Chinese Communist Party should open the economy further, suggesting appreciation of the yuan ahead, economists at CIBC Capital Markets brief.

Key quotes

“Recent PBoC liquidity management, and ongoing strong inward portfolio and FDI flows that are contributing to currency gains, reinforce our positive view.”

“We raise the liquidity picture as the management of it to-date has been as we might expect. Though any anxiety that policy tightening may continue would be a headwind to our bullish view.”

“A tighter monetary policy in China than other major economies has not been so tight as to curb a recovery, but has been a support for the currency against other majors. We expect that to continue.”

“The yuan has been stable to strong since mid-2020 and we forecast further gains this year and next. To any degree that the Year of the Ox encourages consumers and investors, we see markets taking it in stride and maintaining CNH gains.”

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