The Central People's Government of the People's Republic of China

04/29/2019 | News release | Distributed by Public on 04/28/2019 19:50

GDP, inflows may buoy yuan

The Chinese yuan is likely to stay stable for the rest of the second quarter, and might advance moderately amid brightened economic prospects and foreign capital inflows relating to index inclusions, analysts said.

'During the second quarter, the onshore spot rate of the renminbi against the greenback is expected to hover around the current 6.7 without any big fluctuations,' said Mei Dongzhou, an associate professor from the Beijing-based Central University of Finance and Economics. 'It may even head for 6.6, as previous appreciation themes should continue.'

Central parity rate of the onshore renminbi on April 26 was 6.73 against the US dollar, up 1.93 percent since the beginning of the year. During the same period, the offshore yuan also strengthened by 2 percent to 6.73 against the dollar.

The appreciation was mainly attributable to a renewed appetite for emerging markets, the surge in Chinese stock markets and easing Sino-US trade tensions, Jameel Ahmad, global head of currency strategy and market research at FXTM, an international foreign exchange platform, wrote in a note.

'With these same factors plus others potentially gathering further momentum over the course of the second quarter, the currency can continue to advance,' Ahmad wrote, adding the inclusion of Chinese onshore bonds in a key global benchmark would contribute to the trend.

The Bloomberg Barclays Global Aggregate Index started to include Chinese government and policy bank bonds on April 1. As global portfolio managers use the index in their asset allocations, the move may bring foreign capital inflows of more than $100 billion by November 2020, analysts said.

Moreover, global index compiler MSCI Inc has announced it will raise the weighting of A shares in its indexes in three phases from May this year, which may funnel nearly $70 billion in overseas capital into mainland-listed stocks.