December 13, 2022: -The Chinese yuan hugely strengthened in the previous few days as China announced an additional easing of its Covid control measures.
For the initial time since mid-September, the Chinese offshore and onshore yuan broke the seven levels against the U.S. dollar, a critical psychological group Chinese authority have a past of defending. And that’s just the start, one strategist stated.
Investors are underpricing the robustness of the recovery more than in the coming months.
“We’re just starting to see the recovery in the money,” Kathy Lien, managing director of FX strategy at BK Asset Management, told on Thursday. She added that the Chinese currency could make it stronger even further to 6.8 against the U.S. dollar.
The currency weakened the previous 7.3 against the greenback in November; it has been bad since January 2008. Therefore, it recovered to 6.96 within a month as Chinese health authorities continued to say further, which eased measures.
“Investors are underpricing the robustness of the potential development over a couple of months,” Lien stated, ahead of the scheduled outcome of a slew of Chinese economic data in the coming week, including industrial production and retail sales.
“We’re going to experience what is depressed Chinese data reverting into what is consistent upside surprises,” she stated. “That will renew the Chinese yuan demand and drive it even higher than it is currently.”