Less PBOC intervention with SDR move
Print Edition
THE yuan is likely to depreciate moderately against the US dollar next year as China’s central bank will curb its intervention in the currency following the yuan’s inclusion in the IMF Special Drawing Rights basket, according to UBS Group AG.
“We expect a moderate depreciation of 3 percent to 5 percent in the yuan versus the greenback over 12 months, taking USD/CNY to 6.80,” Hu Yifan, regional chief investment officer of UBS Wealth Management China, told a media conference in Shanghai yesterday.
“A less than 5 percent fluctuation is within the tolerance of the People’s Bank of China and will not trigger government intervention especially after the inclusion of the yuan into the SDR,” Hu said.
Hu added the yuan’s inclusion in the SDR basket will boost demand for yuan assets. She predicted the yuan to account for 5 percent of world reserves by 2020, up from 1 percent now.
Hu said the yuan is expected to behave more like a freely-traded currency now that it is included in the SDR basket. She explained the PBOC is likely to expand the daily trading band for the yuan to 3 percent next year from 2 percent now to further liberalize the currency.
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