China rising new daily Covid cases could pose a downside risk to Yuan. But economists at MUFG Bank expect the USD/CNY pair to move in the range of 7.00-7.15 in the near term. 

Lack of direction, range bound 

“While the ease of Covid policy is a positive development, the challenge actually become larger for both national and local governments in the near-term in terms of containing the rising outbreak of Covid cases around the country, as China’s health authorities stressed that the 20-point playbook of new Covid-19 policy ‘does not mean we can slacken our response or even simply end Covid-19 restrictions and lie flat’.” 

“Renewed geopolitical concerns and the Dollar’s move driven by Fed’s potential rate hike pace would imply a volatile USD/CNY pair.”

“We see two-way risks at this point and expect USD/CNY to move in the range of 7.00-7.15 in the near term. Having said that, as we are holding positive view for China’s medium growth (5.1% for 2023), and think that the government is determined to boost growth for medium term, we keep our medium call of USD/CNY to reach 6.65 by the end of 2023.”