USD/CNY: a modest appreciation in the coming quarters

USD/CNY rose for the consecutive week from 6.70 in mid-January to 6.96 in this week.

In recent trade today, the People’s Bank of China (PBOC) set the yuan at 6.9655 vs. the previous fix of 6.9666 and the prior close of 6.9630.

China maintains strict control of the yuan’s rate on the mainland.

The onshore yuan (CNY) differs from the offshore one (CNH) in trading restrictions, this last one is not as tightly controlled.

Each morning, the People’s Bank of China (PBOC) sets a so-called daily midpoint fix, based on the yuan’s previous day's closing level and quotations taken from the inter-bank dealer.

Heightened US-China tensions are likely to keep the volatility high

"Heightened geopolitical tensions between the US and China could continue to support USD/CNY in the near term.     
However, CNY could stabilize somewhat if the upcoming economic data shows a continued improvement in the economy."

"Further, the tailwinds from Covid reopening and an expected weaker Dollar later this year could support a modest appreciation of  the CNY in the coming quarters. 
But an expected narrowing in China's trade surplus will limit the pace of any possible.  

Jeremy Siegel, professor emeritus of finance at the Wharton School of the University of Pennsylvania, says going back to a 50 basis point rate hike would be a bad idea for the Fed, which is wrongly focusing on specific areas of consumer price inflation and wage growth.     Despite the surge in jobless claims, the labor market remains strong.     Private payrolls and job openings reports released this week showed strong hiring and demand for workers.     Weekly claims can be volatile, especially around the holidays, and they are released near Presidents' Day.     The four-week moving average of claims rose slightly to 197,000, the highest level since January, which ironed out some of the volatility.

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