Apr 22 2024: On Monday, UBS adjusted its outlook for the USD/CNY exchange rate, citing escalating geopolitical tensions and reduced expectations of rate cuts by the Federal Reserve. The Swiss financial services firm now predicts the USD/CNY rate to reach 7.35 by June, compared to the previous target of 7.20. Similarly, targets for September, December, and March 2025 have been revised upwards to 7.30, 7.25, and 7.20, respectively, from earlier forecasts of 7.15.
UBS indicates that the People’s Bank of China (PBoC) appears more inclined to tolerate a weaker yuan, which could exert additional near-term pressure on the Chinese currency. The firm’s analysis emphasizes the mounting geopolitical tensions as a significant factor influencing the trajectory of the yuan.
Despite potential adjustments by the Federal Reserve in September, which might typically ease the upward trend of USD/CNY, UBS suggests that such impacts could be mitigated. Market anxieties regarding US-China trade tensions, particularly leading up to the US presidential election in November, could offset the effects of any Fed policy changes.
The revised targets by UBS reflect a cautious stance on the Chinese yuan, as global financial markets grapple with diverse geopolitical and economic variables. UBS’s recalibration of the USD/CNY targets underscores the intricate interplay among central bank strategies, international dynamics, and market sentiment.
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