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FACTBOX-Forecasts for the yuan rate and regime

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1 FACTBOX-Forecasts for the yuan rate and regime on Mon Apr 26, 2010 10:35 am


(AFX UK Focus)mg 2010-04-26 05:59

BEIJING, April 26 (Reuters) - Following are forecasts by selected banks and brokerages of what will happen to the yuan, or renminbi (RMB):
For yuan stories:
Yuan offshore forwards:
Spot yuan:

"BofA Merrill Lynch's central view is USD-RMB at 6.70 and 6.50 by June and December this year. We think the first move may happen any time between now and June and also see a meaningful chance of no change."

A widening of the trading band could happen before the next China-U.S. Strategic Economic Dialogue in late May.
A one-step revaluation is a small probability event. A rise in two-way variations in USD/CNY will overlap with a moderate pace of appreciation for the yuan at an annual rate of around 5 percent after the policy shift.

BNP PARIBAS (April 26)
"We still expect the yuan to rise to 6.62 by the end of 2010. We expect a yuan move only in the third quarter and there will be no one-off revaluation, just modest appreciation within bands."

"We have always maintained that China may widen the yuan's daily trading band before allowing the exchange rate to gradually move up in the manner of the modest appreciation after July 2005."
A simultaneous revaluation of 2 percent cannot be ruled out but is not likely. "Accelerating the pace of appreciation is a fairly easy move, and from this point of view a new round of yuan appreciation is imminent."

"The renminbi is likely to resume its upward crawl against the dollar in Q2". Concern about the fragility of exporters means the pace of gains will be slow. The resumption of appreciation might be coupled with a widening of the trading band.

"The yuan will gain no more than 2 percent in 2010, starting in the second quarter."

CICC (April 20)
Recent property tightening measures lower the risk of hot money inflows when the yuan appreciates. "We believe these measures have increased the possibility of RMB appreciation, and an appreciation will be an even higher possibility in May/June when a trade surplus emerges again."

CITI (April Cool
Appreciation of around 3 percent is likely this year, starting in the second quarter and accompanied by a wider trading band and a peg to a basket of currencies.
"The original purpose of re-pegging to the dollar two years ago, namely growth and employment, are still of paramount importance to the authorities. Protecting margins of exporters will remain a major hurdle to fast appreciation."

CLSA (April 10)
Expect Beijing to resume gradual appreciation before the late-June G20 summit.

"We maintain the view that China will resume a gradual appreciation of the CNY in the current quarter, with a possible 1-2 percent initial revaluation vs USD. Our forecast: 6.5 per dollar by end-2010."

"We expect the yuan to rise to 6.63 per dollar in six months and 6.56 in 12 months. We think a yuan move is likely before the June 26th G20 summit in Canada. We think it is likely that China will shift to an undisclosed basket framework and promote more two-way volatility in dollar/yuan. Probably there won't be a one-off revaluation."

"The yuan is expected to depeg from the U.S. dollar in a gradual way beginning from May. We expect the RMB to rise about 3 to 5 percent this year."
It expects a widening in the yuan's daily trading band to the dollar to plus or minus 1 percent.

"Our view on the CNY is a near-term move in the regime (including wider bands and more flexibility), but no significant up-front appreciation. (Forecast 6.49 after 12 months)

China's decision-makers will be reluctant to allow a big yuan rise that would hurt the export sector. Yuan appreciation against the dollar in 2010 will not exceed 3 percent.

HSBC (April 19)
It expects the yuan to rise to 6.70 per dollar by the end of the second quarter and 6.50 by the end of 2010.
"Our view is that they will resume the gradual appreciation

in the second quarter, but there will be no large one-off move."
JP MORGAN (April 15)
We continue to expect CNY/USD to resume gradual appreciation in April/May, reaching 6.5 by the end of 2010, with increasing two-way volatility

MACQUARIE (April 21)
"Renminbi revaluation looks imminent."
A similar speed of appreciation to that from July 2005 to July 2008, of about 5 percent a year, seems likely now. Expect a rise of 8.4 percent by end 2011 to 6.3 yuan per dollar.

The most likely window of opportunity for an exit from the USD peg is early 3Q or the summer.
Expect an initial adjustment of 2-3 percent with subsequent gradual appreciation to 6.54 by year-end.

NOMURA (April 16)
"Reforms to the exchange rate regime could be announced within weeks, but we do not expect a one-off appreciation. Post-reform, we expect a gradual appreciation of the RMB against USD, reaching CNY/USD 6.45 by the end of 2010."

OCBC (April 22)
"We expect the yuan to rise to 6.65 to the dollar by the end of 2010 and expect a yuan move in the second quarter. If they announce a revaluation, then it will discourage expectations for a future large move, but that's not our main scenario. Our main scenario is no announcement of a discreet jump; they may reiterate that the yuan will be driven by market forces, with yuan's central parity resuming its creep."

"We expect USD/CNY to start falling in the next few months to around 6.70 by mid-year and 6.50 by end-2010."

Increasing Chinese exports to emerging markets -- a recipe for job losses and potential social instability in countries like Brazil and India -- underscore the likelihood that modest CNY appreciation will resume over the coming month. Target: 6.50 by end-2010.

Forecasts a one-off revaluation of 5-10 percent. "China still wants to be seen as an economy that is becoming more constructive in the global international dialogue, more constructive in the global financial architecture, and generally more constructive in the global financial debate. And we saw this at last year's G20 Finance Ministers Meeting. China basically recapitalized the IMF. By putting a large stimulus package in place, it boosted the global economy. And we think in the lead up to the next G20 meeting at Washington at the end of this month, China will make a similar gesture. It will contribute to the global economy by sharing some of its growth and that is appreciating its currency."

"Now that the U.S. Treasury report has been postponed, a window is open in May-June for more CNY flexibility. Then, as confidence in exports recovers, we expect a gradual appreciation -- perhaps some 2 percent against the dollar by the end of this year."

UBS (April 13)
The most important thing for policy makers is to allow economic fundamentals to play a bigger role in the exchange rate regime, so that economic forces can help guide the rate to move towards its sustainable medium-term path. For now this means faster appreciation and greater flexibility.
"In the next few years, we expect the RMB to appreciate by 5-10 percent per annum in real effective terms, achieved through a combination of nominal appreciation and domestic relative price adjustment (higher domestic inflation). We think the policymakers will continue to pay special attention to the USD/RMB rate, and see it trading at 6.4 at end 2010 and 6.0 at end 2011."

(Reporting by Alan Wheatley, Zhou Xin and Aileen Wang)

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