US Dollar - Chinese Yuan Forecasting
When determining the best time to make a foreign exchange transaction, in this case the USD vs CNY, you should pay attention to the recent market trends for both currencies.
US Dollar (USD)
Key fundamentals that previously propped up the USD (such as company revenues, inflation rates and interest rates) have been rapidly eroded. However, there are drivers for a temporary shift in risk demand for the US dollar. Nothing goes down in a straight line, and the US dollar might bounce before it continues its trend lower.
The US dollar has dropped steadily for the last 3 months against nearly all major currencies.
However, as reported by Bloomberg Aug 11, the shorting of the US dollar - betting that USD will continue to drop - is becoming a crowded trade and may backfire.
Bank of America predict that an early discovery of a vaccine against the coronavirus would be a positive for the US dollar. That's because Europe and Asia have a higher chance of fresh waves of infections the longer it takes for a vaccine to be found, a scenario that's bullish for the US dollar, read more at the Bloomberg report.
In July market USD forecasts started predicting US dollar weakness during the second half of 2020. This was triggered by the mid-July european leaders delivery a historic stimulus package which was seen by market commentators as positive for the euro and hence negative for US dollar.
In early May the continuing coronavirus pandemic and an associated possible re-escalation in the US-China trade tensions has moved the market into safer currencies such as the USD and JPY.
The US dollar held its value in 2019 despite the US-China trade tensions, mainly because the greenback is still considered a safer currency to own than most others.
Read more in the article USD Forecasts.
Chinese Yuan (CNY)
Westpac see 10% growth in China next year with a corresponding positive impact on the iron ore price and commodity linked currencies such as AUD. NAB told Bloomberg TV that it sees a recovery in Asian currencies in the 2nd half of 2020 if the coronavirus comes under control.
In early August the offshore yuan surged to a decade high of 7.05 per US dollar, breaking the symbolic and closely watched USD/CNY = 7.0 exchange rate, after the trade war flared up again and the US labelled China a "currency manipulator".
Increasingly, the yuan is being used as a barometer for progress made on US-China trade talks.
Trade tensions have ramped up again since May when President Trump announced higher tariffs on Chinese goods, after China retaliated with tariffs of its own, and then after Trump placed Huawei on the "entity list," thereby making it impossible for the tech giant to do business with US firms.