Bank of America (BofA) has increased its outlook for the Chinese yuan, anticipating greater gains as China’s central bank signals willingness to allow further appreciation. This follows a wave of upward revisions from several major financial institutions, as robust exports and steady capital inflows continue to drive the currency’s strength.
BofA now projects the onshore yuan to close the third quarter at 6.7 per US dollar, an adjustment from the previous 6.8 forecast. This aligns with recent forecast upgrades by Goldman Sachs, Morgan Stanley, and Australia & New Zealand Banking Group.
The currency’s ascent has accelerated, supported by growing capital inflows and a softer US dollar, alongside moves by the People’s Bank of China (PBOC) to strengthen its daily reference rate to heights not seen since May 2023. Notably, the yuan reached its strongest point in nearly three years in both domestic and offshore markets this week.
Goldman Sachs now foresees the yuan climbing to 6.80 per dollar in six months and to 6.70 within a year, while Nomura raised the conviction of its call to short the US dollar against the yuan, aiming for a target of 6.7 by mid-April.
Nomura cites policy willingness to permit more appreciation and external pressure from the US Treasury as key supports for this trajectory. Analysts also note increasing evidence of Chinese corporates repatriating more export earnings as the yuan strengthens.
While sentiment remains positive, market participants expect authorities in Beijing to proceed cautiously with further yuan gains to safeguard export competitiveness and deter speculative capital inflows.
