Yuan likely to remain under pressure for rest of year

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The wide negative yield spread between the U.S. and China will persist for longer.

Although the People’s Bank of China continued to implement a daily fixed value that was significantly higher than market expectations based on the valuation formula, this prevented the yuan from depreciating sharply, but it did not reverse the trend of yuan weakness.

The yuan is likely to remain under pressure for the rest of the year. We are likely to see only a fairly modest boost to growth from policy stimulus in the coming months. Slow growth also favors loose monetary policy. As a result, the wide negative yield spread between the US and China will persist for longer.