“We’re just starting to see the recovery in the currency,” Kathy Lien, managing director of FX strategy at BK Asset Management, told CNBC’s “Street Signs Asia” on Thursday. She said the Chinese currency could strengthen further to 6.8 against the US dollar.
The currency weakened past 7.3 against the greenback in early November, its weakest level since January 2008. However, it quickly recovered to 6.96 in about a month, Chinese health authorities continuing to announce new easing measures.
“Investors are underestimating the strength of the potential recovery over the next couple of months,” Lien told CNBC, ahead of the expected release of a slew of Chinese economic data next week, which includes industrial production and sales. by retail.
“We’re going to see what’s depressed Chinese data turn into what’s more consistent upside surprises,” she said. “This will renew demand for the Chinese yuan and push the yuan even higher than it is now.”
China’s pivot away from its zero-Covid policy has played a big role in optimism about its recovery.
Beijing rolled back restrictions “quite quickly” and rising demand for the yuan comes with easing measures sooner than expected, Lien said.
HSBC’s chief economist for Greater China, Jing Liu, said lifting restrictions would further boost growth.
“Further easing of COVID-19 measures, coupled with more proactive fiscal and monetary policies, could help generate growth above 5% in 2023,” she said, adding that the latest policy adjustments “will pave the way for further easing”. .”
A woman holds Chinese yuan banknotes in this illustration taken on May 30, 2022.
Dado Ruvic | Reuters
BK Asset Management’s Lien said clarity on China’s health measures going forward is what could bring investors back to the Chinese market.
“There was a lot of uncertainty over the past few months, especially over the past two weeks, about how China would handle the protests,” Lien said.
“A lot of companies have started to rethink their plans and I think everyone was anticipating a longer period of zero-Covid policy,” she added.