The Yuan Has Been Asia’s Worst Performing Currency

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The People’s Bank of China guided the Yuan’s 2.5 percent loss since the start of 2014. Nomura Holdings Inc., forecasts a 3.5 percent advance to 6 per dollar by Dec. 31, matching the median projection of analysts surveyed by Bloomberg. According to the global transaction services organization, SWIFT, the Yuan is already the seventh most-traded currency in the world, after the highly liquid top six currencies. Its appreciation quickened in 2013 and its value rose 3 percent, compared with 0.25 percent in 2012.

According to Reuters, China is also a major consumer of South Africa’s exports, and a slow-down there would depress the already struggling domestic output sector. The Yuan has dropped by over 200 basis points against the dollar this year. Wang Tao, chief China economist at UBS, said according to China.org that, until recently, the Yuan has risen steadily against the dollar, and with little volatility.

  

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Nomura’s Singapore-based head of currency strategy for Asia ex-Japan, Craig Chan, reported in an April 4 phone interview that “The last thing they want to do is create an environment where the market sees the Yuan is going to depreciate over the medium term,” according to Bloomberg News, Chan said that, “Capital flight could be very large and destabilizing for the domestic market.”

It is hard to bet against a central bank – whether it’s the Chinese or the Swiss. But for now, most economists still expect, according to BBC Business News that, the Yuan will continue its steady rise as the economy continues to grow. It has been reported that the People’s Bank of China is expected to double the Yuan’s trading band by the end of June, according to the 24 of 29 analysts surveyed by Bloomberg. The period of steady and predictable Yuan gains is over and the outlook will depend on factors including foreign-exchange reform liberalization, economic fundamentals and China’s push to promote the Yuan’s global usage, Dariusz Kowalczyk, a Credit Agricole CIB strategist, wrote in a note according to the South China Morning Post.

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