USD/CNY: Upward pressure to strengthen throughout August – Mizuho

In July, the USD/CNY pair fluctuated violently at the end of the month. In August, USD/CNY is forecast to continue fluctuating within a narrow range, while upward pressure is likely to strengthen, economists at Mizuho Bank report.

There are long-term factors to strengthen the yuan

“USD/CNY is most likely to continue fluctuating within a narrow range, as has been the case since the second half of June. However, market participants should also be careful about strengthening upward pressure.”

“There are nevertheless long-term factors to strengthen the Chinese yuan, such as the current account surplus in China, as well as the capital inflow, which is likely to continue based on the fact that Chinese government bonds were incorporated into a global index – this would encourage market participants to buy the Chinese yuan.”