China’s yuan faces volatility amid US pressure and home-grown stimulus: analysts

China’s yuan is set to face volatility due to an expected boost from Beijing’s economic stimulus package while simultaneously being pitted against pressure from the United States ahead of its presidential election on November 5, analysts said on Monday.

The yuan would appreciate against the US dollar if “significant fiscal-policy easing materialises” as part of Beijing’s stimulus, Goldman Sachs analysts led by Xinquan Chen said in a research note while noting that this may offset depreciation pressure by any potential US trade-tariff increases.

Meanwhile, other analysts said robust US jobs data could offer more support for the dollar, as could the election’s outcome.

“Rapid yuan appreciation may encourage more foreign-exchange settlement by exporters, boosting [the yuan] against trading-partner currencies and potentially hurting China’s export growth, which we think the [People’s Bank of China] would want to avoid,” the Goldman Sachs analysts said.

China’s central bank said in September that it would “guard against the risk of exchange-rate overshooting”.

Many Chinese exporters had been hoarding US-dollar-denominated assets to reap higher returns, but in recent months they have appeared increasingly inclined to convert them into yuan assets in light of the yuan’s appreciation.