The Chinese yuan is still surprisingly strong. Looking ahead, economists at Nordea expect the USD/CNY pair to advance nicely throughout the rest of 2022.

Goods trade surplus will decline going forward

“Reduced restrictions and falling real incomes in advanced economies indicate that demand for Chinese goods should slow down later this year. In March, China’s exports volume declined and the PMI export orders have dropped too. Thus, the goods trade surplus will decline going forward.”

“The interest rate differential between the US and China has turned positive and it should push the USD/CNY higher this year.”

“For the PBoC the weaker CNY would not be a problem and the central bank already most likely favours a weaker yuan.”

“Lockdowns in China are dampening growth momentum and are a negative factor for the CNY, but on the positive side, the number of Chinese travelling abroad will remain below pre-pandemic levels and travel-related FX demand won’t increase in the coming months.”