Royal Bank of Scotland has cut back its end of year forecast for the Chinese yuan, citing a dampening in overseas demand and a resurgent dollar.
The yuan exchange rate will now increase to 6.6 per dollar at the end of year, rather than the previously forecasted 6.4, with a surge in the dollar’s price a key factor in this.
The Chinese currency, which closed today at 6.86 on the Shanghai Stock Exchange, has lost 0.1 per cent against the dollar since the end of June after growth of 4.2 and 2.3 per cent in the first and second quarters respectively.
Ben Simpfendorfer, a currency strategist in Hong Kong, told Bloomberg: “A stronger dollar is an important driver of the forecast change.
“However, the People’s Bank of China is also partly responding to a weaker global economy and lower inflation.”
The Bank has tried to offset the dollar’s strength by keeping the yuan’s mid-point steady from yesterday (August 13th).
Demand for China’s exports has weakened in recent months due to slowdown in the growth of major importers of Chinese goods such as the US and UK.