The Chinese yuan is gaining at the end of the trading week despite several bearish forecasts pertaining to the short-term outlook of the national economy and the currency. This comes one day after the yuan extended its losing streak to six months, the longest in 26 years, after shedding 4% against the greenback in the third quarter.
On Sunday, the Caixin Purchasing Mangersâ Index (PMI) for the nationâs manufacturing sector will be released and the market is anticipating it to read 50.5 points for September, down from 50.6 in August — Any reading above 50 shows expansion, and anything below is a contraction. This could be the lowest reading since June 2017.
In other economic data, Bloomberg posted early indicators of overall activity, and the business news network suggested that factory inflation, sales manager sentiment, small business confidence, and property stocks will be weaker in September.
Amid expectations that the national economy is expanding at a sluggish pace, the Peopleâs Bank of China (PBOC) left interest rates unchanged, refraining from following in the footsteps of the Federal Reserve, which raised a key rate by a quarter-point earlier this week. The policy moves provided a dichotomy in both economies: for one, the economy is booming; for the other, it is losing momentum.
And further escalation in the US-China trade war could be bad news for the yuan. Renowned independent economist Andy Xie told CNBC that the yuan could depreciate another 10% against the dollar by the end of the year.
The currency fluctuates reflecting the economic challenges, so when you have tariffs rising on you, the currency adjustment is inevitable.
Despite the bearish reports, HSBC Holdings Plc forecast that the Chinese economy will surpass the US within 15 years, as the GDP is expected to balloon to $26 trillion by 2030, up from todayâs $14.1 trillion.
This comes as Washington recently applied 10% tariffs on $200 billion worth of Chinese goods, causing Beijing to retaliate with $67 billion in goods
The USD/CNY currency pair tumbled 0.31% to 6.8690, from an opening of 6.8902, at 15:34 GMT on Friday. The EUR/CNY plunged 0.52% to 7.9835, from an opening of 8.0255.
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