Vice President at JPMorgan Asset Management Sylvia Sheng has shared her thoughts on the future of the yuan/dollar pair. However, her forecasts turned out to be rather disappointing for the US dollar buyers. Sheng is confident that the Japanese currency has every chance for a significant rally. Moreover, there is a number of fundamental factors that support her theory.
According to Sylvia Sheng, trade growth could trigger strong demand for the yuan. Despite slowing global demand amid the COVID-19 crisis, China’s exports have held up remarkably well, beating market expectations for five consecutive months. Along with trade, investment in Chinese goods is expected to drag the yuan up. This solid export performance is likely to continue. Sylvia Sheng notes that until a vaccine or more effective coronavirus treatment is found, the demand for medical supplies will most likely remain strong. The same goes for tech products that support people who work from home. The statistics bear out her words. In July, China's exports increased by 7.2% from a year earlier. Moreover, foreign investors made record net purchases of Chinese bonds totaling 165 billion yuan ($24 billion), marking the highest level since China had opened the market in 2010.
Summing up, Vice President at JPMorgan noted that compared to yields on 10-year government bonds in the United States as well as in Germany and Japan that turned out to be zero and negative, respectively, the 3-percent yield on China's 10-year government bonds sounds like a very good result.
