Yuan Appreciation Expected, But Two-Way Risks Remain Prominent
According to OCBC's latest FX strategy note, the Chinese yuan (RMB) is expected to appreciate gradually against the US dollar, driven by fundamental factors such as China's trade surplus and ongoing efforts to internationalize the currency.
The bank's strategists anticipate a measured appreciation trend for the yuan, but emphasize that the path will not be one-directional, with potential for bouts of weakness due to external uncertainties.
Several key drivers underpin OCBC's forecast, including China's robust export performance and foreign portfolio inflows into Chinese bonds and equities.
The risks include a potential resurgence of US inflation, which could lead to a more hawkish Federal Reserve and a stronger dollar, as well as trade frictions and geopolitical flashpoints that could trigger sudden capital outflows and depreciation pressure.