On Monday, UBS revised its forecast for the exchange rate, citing rising geopolitical tensions and expectations of fewer interest rate cuts from the Federal Reserve. The Swiss financial services provider now expects the USD/CNY rate to reach 7.35 in June, up from the previous target of 7.20. Similarly, the September target has been adjusted from 7.15 to 7.30, the December target from 7.15 to 7.25 and the March 2025 target from 7.15 to 7.20.
UBS suggests that the People’s Bank of China (PBoC) is showing greater willingness to allow a weaker yuan, which could contribute to additional short-term pressure on the Chinese currency. The firm’s analysis points to rising geopolitical tensions as a key factor affecting the yuan’s trajectory.
Despite the potential for a move by the Federal Reserve in September, which could generally soften USD/CNY’s uptrend, UBS believes the impact can be mitigated. The company notes that market concerns about US-China trade tensions, especially ahead of the US presidential elections in November, could dampen the effects of any policy changes by the Fed.
UBS’s revised targets reflect a cautious view on the Chinese yuan as the global financial market continues to weigh various geopolitical and economic factors. The company’s adjustment of USD/CNY targets highlights the complex interplay between central bank policy, international relations and market sentiment.
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