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SHANGHAI -Chinese authorities have rolled out an array of tried-and-true maneuvers in recent weeks to slow the yuan’s slide, showing relative success compared with other battered currencies, but analysts say they face long odds against an unstoppable dollar.
The stepped-up efforts, taken as the yuan tumbled about 7 percent from mid-August to a 14-year-low around 7.25 per dollar on Sept. 28, range from unusually strong signals to the market – last week the central bank told state-owned banks to prepare to sell dollars – to administrative measures that raise the cost of shorting the yuan.
That helped the yuan to regain some traction against the dollar, which also paused for breath against other currencies, but analysts expect the yuan to weaken further in the months ahead with a risk of volatile gyrations along the way.
“Considering the strength of the dollar, we now expect (the dollar/yuan rate) to trade around 7.40 around October and November,” SEB said in a note.
While that was among the more bearish forecasts, ANZ and Goldman Sachs saw a yuan rate of 7.20 per dollar within the next three months or so, with Goldman also noting upside dollar/yuan risks, and Citi said it could push to 7.3 in a strong dollar environment. The yuan late on Friday was trading around 7.12 per dollar.
In a sign that investors do not foresee the new measures tamping down swings in the yuan, expectations of future volatility priced into one-month yuan options have doubled in the past month.
