12 out of 19 analysts believe a yuan revaluation will come by June 30th, according to a new Bloomberg survey. 17 out of 19 think it will happen by September 30th, and all of them think it will happen by year-end.
So everybody thinks a revaluation of some form is coming this year, yet they are roughly split as to how it might be accomplished.
11 out of 19 expect a widening of the yuan’s allowed trading band while the rest expect a one-off hike.
The trading band will be widened to between 0.75 per cent and 3 per cent either side of the central bank’s daily reference rate, from 0.5 per cent now, the survey showed. The median estimate is for the yuan to strengthen 3.1 per cent to 6.62 per dollar by year-end. Estimates ranged from 6.4 yuan to 6.8 yuan in the survey carried out since April 9.
The analysts are more bullish on the currency than traders in the forward market. Nine-month non-deliverable yuan contracts show traders are pricing in a 2.3 per cent gain in the currency from the spot rate of 6.8252 as of 8:10 a.m. in Hong Kong.
Even traders expect a revaluation this year.
Thus it seems the question for 2010 is how China will revalue, not if. A widening of the trading band seems to most likely since not only are the analysts above expecting it but some Chinese government officials have already said this is the likely course of action as well.
An anonymous official was quoted by China Business News as saying “Research shows that a one-off yuan appreciation is not applicable but it’s possible to widen the yuan trading band, such as from current 0.5% to 1%,” and Zhang Junhua, the director of research at the People’s Bank of China, has said that inflation is now a greater risk than a double dip. A yuan revaluation would help temper inflationary expectations within the economy.
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