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China Growth Uptick Raises Faith in Yuan

By NexChange
Capital Markets

Better-than-expected Chinese growth in the first quarter has led some analysts to suggest the renminbi is undervalued.

Official figures say the Chinese economy grew at a pace equivalent to 6.9% a year in the first quarter, an improvement over most estimates.

According to Jameel Ahmad of brokerage FXTM, the growth indicates the renminbi is oversold.

“I don’t believe there is any justification for a currency belonging to an economy that is growing at levels close to 7% to be valued at such historically low levels,” he said.

Other commentators maintained a prediction of further depreciation of the Chinese currency, but at a slower pace.

Aidan Yao, an economist at Axa Investment Managers, predicted that a dollar would be worth between 6.9 and 7.1 yuan by the end of the year, implying a relative depreciation in the Chinese currency of about 2%. His firm had previously predicted a dollar-to-yuan ratio of between 7.1 and 7.3 by the end of 2017.

©2017 funds global asia

This article was originally published in Funds Global Asia.

Photo: David Dennis

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