The RMB is expected to stay flat against the US dollar over the coming year as the currency’s appreciation pace comes to a halt, said research firm East and Partners on Monday.
That is the insight from a survey in which the firm interviewed CFOs, finance managers or corporate treasurers and business owners of about 1,850 importers and exporters with annual turnover of US$1–100 million across Hong Kong, Singapore, Malaysia and the Philippines in February 2018, according to East & Partners.
“We expect a weaker US dollar and surge in market sentiment, driven mainly by improving economic fundamentals and easing trade tensions between the world’s two largest economic powers, to support a slight appreciation of the RMB over the remainder of 2018 based on this new research”, said Sangiita Yoong, East & Partners Lead Analyst Asia.
The RMB, which has gained about 3% against the dollar so far this year, is now forecast to trade at 0.1589 by year-end – little change from its present level of 0.1580, she noted.
However, RMB is overall set to weaken broadly against most major currencies traded in Asia, according to East and Partners.
Businesses in the region expect the RMB to lose the most value against the euro, down 11.5% to 0.1135, while the Singapore dollar and Australian dollar are projected to fall 1.0 percent and 2.0 percent respectively by end-2018, the firm said.
“Interestingly, businesses in Hong Kong and Singapore, where RMB is the second most traded currency behind the greenback, are notably more bullish on the growth prospects facing the RMB this year than the Philippines and Malaysia,” Yoong observed.
The research shows that smaller businesses in the region are increasingly using RMB instead of the Euro to settle trades, she pointed out.
“Currently, RMB accounts for close to one-fifth of average enterprise FX volume in Singapore and one-third in Hong Kong, up 27.9% and 14.6% respectively from three years ago,” she added.