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Top forecaster warns against shorting the yuan

By Lawrence Gash

Zhou Hao points to trade talk progress

One of the most accurate yuan forecasters Zhou Hao has discouraged investors betting against China’s currency.

The economist at Commerzbank AG said that cynicism leading up to Sino-American trade talks has caused the market to not consider potential improvements in the state of the yuan or renminbi.

The Chinese currency dropped past 7 in August 2019 for the first time since the 2008 global financial crisis, with Beijing increasingly concerned with outflows of capital from the emerging superpower.

“Investors shouldn’t rule out the possibility that good news on trade talks emerge in the near term,” said Zhou, “so I suggest traders be flexible and corporates not be too speculative when buying the dollar against the yuan.”

This warning has been somewhat vindicated since trade talks reopened. The two countries have so far agreed a miniature deal, with China conceding to American monetary policy demands and agreeing to purchase more American agricultural goods.

The US has previously accused China of being a currency manipulator and it seems that Zhou implicitly agrees with such a perspective. He predicted the yuan to trade at 7.15 at the end of 2019 and stated: “Officials won’t allow rapid declines - the policy red line is around 7.2.”

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