China’s yuan is under pressure to depreciate as rising Covid cases add to concern over renewed lockdowns, while expectations of aggressive interest-rate hikes by the Federal Reserve boost outflows.
Investors are turning cautious on China as the economy sputters under the weight of a Covid-Zero policy and deepening turmoil in the, which risks spilling over into the rest of the financial system. While the People’s Bank of China has injected liquidity to soothe markets, sentiment remains fragile. While cautious over the short term, the bank sees the yuan benefiting from some tailwinds as the year progresses. China’s robust current-accountand potential easing of US tariffs will help the currency strengthen to 6.60 per dollar by year-end, Liu said.