USD/CNY rose for the fifth consecutive week from 6.70 in mid-January to 6.96 last week. Economists at Commerzbank believe that the pair could move back lower in the coming quarters.

Heightened US-China tensions are likely to keep the volatility high

“Heightened geopolitical tensions between the US and China could continue to support USD/CNY in the near term. However, CNY could stabilize somewhat if the upcoming economic data shows a continued improvement in the economy.”

“Further, the tailwinds from Covid reopening and an expected weaker Dollar later this year could support a modest appreciation of the CNY in the coming quarters. But an expected narrowing in China’s trade surplus will limit the pace of any possible yuan appreciation.”

“Heightened US-China tensions are likely to keep the volatility high.”