The Chinese renminbi is likely to depreciate by another 2 percent or more in the coming 12 months amid a sluggish economy, DBS Bank (Hong Kong) Ltd. said.
Nathan Chow Hung-lai, vice president of economist group research at DBS Hong Kong, said the currency’s highly anticipated inclusion in the International Monetary Fund’s Special Drawing Rights basket will definitely help in the yuan’s internationalization, but it won’t significantly boost demand right away, the Hong Kong Economic Journal reported on Tuesday.
Chow expects the renminbi exchange rate to hit 6.42 to the US dollar by the end of this year and further soften to 6.52 in third quarter of next year.
He also expects the People’s Bank of China to shave another 25 basis points off lenders’ reserve requirement ratio and benchmark interest rates before the end of this year.
Over 50 percent of enterprises expect a downtrend in the currency’s value in the coming 12 months, according to a recent survey by DBS Bank.
About 44 percent of the respondents predict a depreciation of 2 to 5 percent.
Despite the renminbi’s depreciation, however, yuan-denominated orders and the use of the currency for invoicing and trade settlement remained stable over the past 12 months, the bank said.
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