The Chinese Yuan has remained resilient against the US Dollar, with USD/CNY exchange rate holding close to 6.79 despite the Greenback’s recent recovery.
HSBC believes the pace of Yuan appreciation may slow in the near term, but argues that the broader trend remains supported by long-term structural factors.
The bank notes that while the People’s Bank of China allowed the daily USD/CNY fixing to move modestly higher during June, this largely reflected broad US Dollar strength rather than a shift in policy.
According to HSBC, “directionally, RMB strength remained intact” thanks to China’s ongoing push towards financial self-reliance and internationalisation of the Yuan.
The bank highlights recent measures announced at the Lujiazui Forum, including steps to expand RMB settlement, cross-border trading and capital account opening. HSBC also points to new initiatives allowing selected Chinese banks to conduct offshore Yuan trading through Shanghai’s Free Trade Zone.
These reforms, together with continued diversification away from US assets and stronger international use of the Yuan, should continue to underpin the Chinese currency.
While HSBC expects the US Dollar to remain firm in the short term, it believes China’s structural policy agenda leaves the Yuan well placed to strengthen over the medium term.
