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QINGDAO TODAY
在线翻译:
szdaily -> Markets -> 
Yuan trading likely to get more volatile
    2018-12-18  08:53    Shenzhen Daily

CHINA’S exchange rate is likely to get more volatile in time as the country pushes greater international use of the yuan, according to Goldman Sachs Group Inc.

China’s current account will tip into deficit in coming years, in the view of many strategists, as its increasingly large economy continues to grow faster than the rest of the world.

In financing that deficit, China could reduce risks if it acquired funding in its own currency — much like the United States does now, and unlike more vulnerable countries such as Brazil, Goldman economists including M.K. Tang wrote in a note yesterday.

By reducing reliance on the U.S. dollar, China could also avoid the kind of vulnerability Russia has faced with U.S. sanctions on its companies, it said.

“After a brief hiatus in the last couple of years, global promotion of the RMB will likely be supported with a greater sense of urgency,” the team wrote. “ RMB” refers to the renminbi, an official name for the yuan.

One occurrence that is likely to come is a convergence between the yuan traded offshore, known as CNH, and that traded onshore, known as CNY, the economists argued. Their analysis of discrepancies between the two suggested that yuan volatility would be “much closer to that of other major currencies” once exchange rate controls were eased.

“A truly global currency is one whose worth should be essentially indifferent to country boundaries,” the Goldman economists wrote. “Should CNY’s fluctuations one day indeed become as large as those of other major currencies, it may also significantly push up the volatility of the other Asian” emerging market currencies, they added.

Up to now, Asian exchange rates have tended to fluctuate less than other emerging nation currencies, possibly because the yuan has played an “anchor” role, Goldman said.

The yuan firmed in active trade yesterday, but hovered near the psychologically-important 6.9 per dollar level as traders awaited policy meetings and events at home and abroad this week.

President Xi Jinping is expected to give a speech in Beijing today to mark the 40th anniversary of the opening up of China’s economy. The central economic work conference is likely to start later this week, where key growth targets and policy goals for 2019 will be discussed.

The U.S. Federal Reserve is set to raise interest rates by 25 basis points at its Dec. 18-19 meeting and possibly indicate a trajectory for further tightening expectations. (SD-Agencies)

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