Chinese Yuan to Continue Trading Weak Despite Upcoming Phase One Trade Deal: Reuters Poll
Arslan Butt • 1 min read
A recent Reuters poll indicates that the weakness in the Chinese yuan is expected to continue into this year despite the upcoming signing of the phase one trade deal as it does not fully resolve trade tensions between the US and China. Over the past year, the Chinese yuan lost around 1.3% of its value against the US dollar.
Recent optimism surrounding the partial trade deal signing have helped the yuan to climb to a five-month high against the greenback, but respondents polled appear cautious that this could be a momentary effect. Unless a more clear and permanent improvement in US-China trade relations emerges, which includes rollback of more tariffs, the yuan is likely to exhibit signs of weakness.
The yuan could lose around 1% of its value to cross the 7 level against the dollar over the coming three months and stay around these levels over the coming year. While the US and China have agreed to sign the phase one trade agreement next week, there is still lack of clarity on how China will increase purchases of US farm products without increasing its low-tariff import quotas on grains this year.
The skepticism surrounding the interim trade agreement and forthcoming negotiations towards the phase two and phase three of the deal are likely to weigh on USD/CNH over the next few months.