The Chinese yuan (CNY) rallied to its strongest value since May 2016 in September, continuing a trend that started in June amid stronger-than-expected growth and a weakening of the U.S. dollar. On 8 September, the yuan closed the day at 6.48 CNY per USD, which represented a 3.4% appreciation over the same day of the previous month. It gained 6.7% year-to-date and was 2.7% higher compared to the same day last year. In the following days, the yuan lost some of the ground due to a strengthening USD.
Positive market sentiment has strengthened the Chinese currency. Economic growth surprised market analysis to the upside in H1 and, although recent indicators point to a deceleration in Q3, economic dynamics remain fairly strong overall. Moreover, the yuan benefited from diminishing fears of an open trade war with the U.S., tight capital controls and a weakening of the U.S. dollar. While the strengthening of the yuan highlights China’s healthy growth momentum, if sustained it could hurt the country’s all-important external sector.
FocusEconomics Consensus Forecast panelists expect the Chinese yuan to trade at 6.74 per USD at the end of 2017. For 2018, the panel projects that the CNY will trade at 6.81 per USD.