Yuan volatility in first quarter at 1.8pc, says ING Greater China economistBusiness | 15 Apr 2019 8:13 pm
The yuan depreciated by 0.18 percent versus the US dollar in the first quarter but the high-low volatility was still quite small at 1.8 percent and it reflects that the People's Bank of China has carefully managed exchange rate movements, a bank economist says.
The central bank has to make the yuan flexible enough to follow the dollar index's movements, that is to say, when the dollar rises, the yuan weakens, says Iris Pang, Economist for Greater China at ING Bank. “But it also had to cater to political needs by depreciating the yuan when there were trade talks to defy what the US President Donald Trump said, 'the yuan cannot depreciate if there is any trade deal,''' Pang says.
The ING Bank forecast for US dollar versus the yuan in the second quarter and third quarter is at 6.85, which may have to be revised as the central bank has managed the yuan in a very narrow range. “But our year-end forecast at 6.75 seems to match what the central bank is doing. At least for now,'' Pang says in a research note.