China yuan set to enhance more as Covid determines ease: Kathy Lien

“Investors are underpricing the robustness of the potential recovery over the next couple of months.

Kathy Lien

BK Asset Management

“We’re simply starting to see the healing in the currency,” Kathy Lien, managing director of FX strategy at BK Asset Management told CNBC’s “Street Signs Asia” on Thursday. She said the Chinese currency could strengthen even further to 6.8 against the U.S. dollar.

The currency weakened past 7.3 against the greenback in early November, its weakest since January 2008. However, it quickly recovered to 6.96 within about a month as Chinese health authorities continued to announce further easing measures.

“Investors are underpricing the toughness of the prospective healing over the next number of months,” Lien told CNBC, ahead of the scheduled release of a slew of Chinese economic data next week, which includes industrial production and retail sales.

“We’re visiting what is depressed Chinese information, develop into what is more constant advantage surprises,” she said. “That will restore the need for the Chinese yuan and drive the yuan even greater than it is right now.”

Growth ahead

China’s pivot away from its zero-Covid policy has played an important part in optimism about its recovery.

Beijing has been rolling back the restrictions “quite rapidly,” and the surge in demand for the yuan comes with a sooner-than-expected easing measures, Lien said.

HSBC’s chief economist for greater China Jing Liu said the lifting of restrictions will boost growth further.

“The boosted relaxation of COVID-19 steps, together with more proactive fiscal and accommodative financial policies, might assist to engineer development of above 5% in 2023,” she said, adding that the latest adjustments in policy will “pave method for more relaxations.”

Woman holds Chinese Yuan banknotes in this illustration taken May 30, 2022.

Dado Ruvic | Reuters

Lien of BK Asset Management said clarity in China’s health measures going forward is what could drive investors back to the Chinese market.

“There was a great deal of unpredictability over the previous months, especially over the previous number of weeks, about how China would deal with the demonstrations,” Lien said.

“A great deal of services have actually begun to reconsider their strategies and I believe everybody expected a longer duration of no-Covid policy,” she included.


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