Daily Management Review

The Chinese Currency Can Become Significantly Cheaper In 2016


01/11/2016


According to forecasts of the British hedge fund Omni Partners, the renminbi-dollar will fall by 15% in 2016; and even lower in the case of the credit crisis. Earlier this year, the Chinese currency has experienced one of the strongest fall in its history - renminbi fell to a five-year low last week.



pixabay.com
pixabay.com
London hedge funds Omni Partners, managing assets of $ 965 million, predicts a further fall in the yuan. Analysts Omni Partners said that this year, the Chinese currency’s rate against the dollar would fall by 15%, and even lower if the credit crisis comes. "While the Chinese authorities have a strong interest in the market in dollars and yuan, they eventually cannot deal with the fundamentals of the economy", - said Chris Morrison, head of the Omni Partners Strategy. According to him, even a forecast that the exchange rate in 2016 will drop to 7-7.5 yuan per dollar is too conservative if China's credit crunch, then we can talk about 8-10 yuan per dollar. According to data compiled by Bloomberg, likelihood, that renminbi-dollar pair reaches the mark of seven, is about 33%.

Last week, renminbi fell to a five-year low. Rate decreased by 1.4% to 6.59 yuan per dollar. After that, many banks have lowered their year forecast for renminbi - Goldman from 6.60 to 7, ABN Amro from 6.55 to 6.70. Before, renminbi experienced such a strong decline in August this year (then, the authorities adopted new rules under which the currency’s rate is set according to the results of trading). This measure is viewed by the Chinese authorities as liberalization of the formation rate and a step towards free convertibility of the yuan. Last Friday, the People's Bank of China said that it is going to keep a balanced monetary policy in 2016, and hopes to maintain the RMB exchange rate basically stable at a reasonable and balanced level.

Leading European, American, Asian stock indexes have fallen by 6-14% over the past week. Today, Asian stock markets continued to fall, especially strong down is being seen in China - the Shanghai Composite Index lost 5.3%, Hong Kong's Hang Seng - 2,5%. Since early January, the Chinese government has twice suspended trading on the Shanghai and Shenzhen Stock Exchange after a sharp drop in the index of CSI 300. Reducing indices are associated with weak December's figures for industrial activity and a sharp depreciation of the yuan.

spurce: bloomberg.com






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