Yuan will face reality after the rally caused by China’s opening

Strong fluctuations in the yuan caused by positive sentiments in Chinese markets will face reality. Currently, many question whether the economic recovery will be able to match the growth of the currency.

Last month yuan recouped almost a third of its annual losses. On Monday, it overcame the key level of 7 per dollar. Societe Generale AG supposes that the growth above 6.95 will be excessive. Strategists from UBS Group AG, on the contrary, expect that at the end of the year, the yuan will remain at a level of 7 per dollar and become weak in early 2023 after strong fluctuations. 

Analysts are worried that the positive sentiment will disappear. Growth data can be weak, and the coronavirus can hurt the economy once restrictions are lifted.

Chief China economist at Nomura International Ting Lu wrote a note. He wrote that opening the economy is key to returning China to the path of development. However, it is important to understand that reality may not be so perfect.