Sustained RMB Rise Expected Despite Fed Flagging Rate Hike


China Merchant Securities expects continued appreciation of the RMB despite the US Federal Reserve flagging a gradual rise in interest rates.

The minutes of the US central bank May 2 – 3 policy indicate that the Federal Reserve intends to stage a gradual increase of rates as well as shrink its immense balance sheet.

Wan Zhao, senior financial analyst with the financial markets department of China Merchants Securities, said to Caixin that despite expected increases to interest rates the US dollar has entered a downwards trajectory, because improvements to the economic performance of America’s trading partners will trigger greenback outflows

Wan expects the weak performance of the US dollar to leave little room for  large-scale depreciation of the RMB, and the Chinese yuan to embark upon an upward trajectory starting in the second half of 2017.

China’s Ministry of Commerce claimed in a recent report on Sino-American trade relations that Beijing would refrain from engaging in competitive currency-valuation vis-a-vis the US.