Bank of America Joins in on Yuan-Forecast Cuts Amid Trade War
Bank of America Merrill Lynch is the latest bank to downgrade its forecasts for China’s exchange rate
(Bloomberg) -- Bank of America Merrill Lynch is the latest bank to downgrade its forecasts for China’s exchange rate, days after JPMorgan Chase & Co. similarly concluded that an escalating trade war with the U.S. was likely to feed through to a weaker yuan.
“Near-term damage to China growth is already evident” and will hit the economy into the first quarter of 2019, BofAML strategists including Claudio Piron in Singapore wrote in an Oct. 2 note. “Given this, and the prospect of higher U.S. interest rates, Beijing will likely allow and lean on yuan weakness as a crutch for economic support.”
- The bank now sees the yuan at 7.05 per dollar in the first quarter of 2019, versus 6.90 before.
- It now projects the yuan at 7.10 in the second quarter, against 6.85 before.
- Other Asian currencies were also downgraded, with Indonesia’s rupiah seen dropping more than 5 percent to 15,800 per dollar by the second quarter.
- India’s rupee is seen dropping almost 3 percent to 75 per dollar.
The team’s new forecast indicates a 2.5 percent drop in the yuan by next quarter, after the currency closed at 6.8725 in onshore trading last week.
To contact the reporter on this story: Christopher Anstey in Tokyo at canstey@bloomberg.net
To contact the editors responsible for this story: Christopher Anstey at canstey@bloomberg.net, Andreea Papuc
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