China’s renminbi (CNY) will benefit from its safe haven status
The renminbi (CNY) has demonstrated its resilience to global market volatility in recent months, holding steady against the US dollar and other currencies. This has happened despite China is experiencing a significant economic slowdown, a narrowing in China-US yield spreads, and most recently, the Russia-Ukraine war.
What you will learn:
- As financial markets are likely to remain volatile in the near term due to worries over inflation, supply chains, geopolitical risk, and rising global interest rates, we expect the CNY will remain durable in H1.
- However, policy divergence with the US and a smaller current account surplus in 2022 will become increasingly important in determining CNY movements and will weigh on currency exchange rates in H2.
- Meanwhile, sanctions on Russia by the US, EU, and their allies will increase the usage of CNY in international financial transactions. However, the impact on the CNY exchange rate will be limited, as trade with Russia accounted for only 2.4% of China’s goods trade as of 2021.
Tags:
Related research
Post
The miracle growth story of Vietnam has further to unfold
Vietnam's GDP grew by an average rate of 7% annually in the past three decades, surpassing all its ASEAN regional peers. Although 2023 and 2024 are set to see Vietnam's weakest growth outside of Covid years, we think the pain is short-term.
Find Out More
Post
The Economic Impact of China PNTR Repeal
This study provides rigorous analysis to inform policymakers on the potential impact of an escalation in US-China tariffs. We examine how removing China's Permanent Normalized Trade Relations (PNTR) status would affect the US economy, finding that tariffs would cause substantial output and job losses.
Find Out More
Post
Three key idiosyncrasies in Asian trade and why they matter
Idiosyncrasies in recent Asian trade data suggest that country-specific factors are becoming more influential and causing some countries' exports to buck cyclical trends. If that continues, the fortunes of regional exporters will diverge further in 2024, though we still think the overall export trend will be subdued.
Find Out More