Financial analysts at TD Securities anticipate the Chinese Yuan (CNY) to maintain a relatively stable position throughout 2024, citing the current economic conditions in China and persistent preferences among onshore firms to sell CNY and retain holdings in USD.
Despite the weakened performance of the USD in the latter part of the previous year, onshore firms continue to favor selling the Yuan and embracing the US Dollar. The analysts attribute this stance to the uncertain economic landscape in China, expressing expectations that the inflows recorded during November and December could see a reversal.
The economic outlook for China remains somewhat opaque, contributing to the cautious sentiment surrounding the Yuan. Analysts note a medium-term bearish view on the Chinese currency among onshore firms, who choose to hold onto USD as a more favorable option.
An additional factor exerting pressure on the Renminbi (RMB) is the anticipated rise in outbound China travel, evident from the noticeable surge in foreign exchange sales related to services. In light of these considerations, TD Securities does not foresee the USD/CNY exchange rate falling below the 7.0000 threshold in 2024, despite their bearish outlook on the USD for the year. This cautious projection reflects the intricate interplay of domestic and global factors shaping the trajectory of the Chinese Yuan in the coming months.
