On April 26th, the exchange rate of the US dollar to the Chinese yuan breached the 6.9 level, a significant milestone for the currency pair. The following day, April 27th, the yuan’s central parity rate against the dollar was adjusted up by 30 basis points, to 6.9207.
Market insiders suggest that due to the interplay of multiple factors, there is currently no clear trend signal for the yuan exchange rate. The range-bound oscillation of the dollar-yuan exchange rate is expected to continue for some time.
Sentiment indicators reveal that the continuous negative value of onshore-offshore market prices (CNY-CNH) implies depreciation expectations in the market. However, as China’s domestic economy steadily recovers and the US dollar weakens, there is an underlying basis for the yuan to appreciate in the medium term.
The macroeconomic team at China Merchants Securities believes that as more trading nations opt for non-US dollar currencies (particularly the yuan) for trade settlement, the weakening of the US dollar will trigger enterprises to settle their accounts and help push the yuan exchange rate up.
The team forecasts that the yuan exchange rate will return to an appreciation trajectory in the second quarter, with the potential for the exchange rate to reach highs between 6.3 and 6.5 in the next two quarters.
Argentina Announces Use of Yuan for Import Settlements
On April 26th, Argentina’s Minister of Economy, Martín Guzmán, held a press conference announcing that the country will stop using the US dollar to pay for imports from China, switching to the Chinese yuan for settlement instead.
Guzmán explained that after reaching agreements with various companies, Argentina will use the yuan to pay for Chinese imports worth approximately $1.04 billion this month. The use of the yuan is expected to accelerate the import of Chinese goods in the coming months, with a higher efficiency in the authorization process.
From May onwards, it is anticipated that Argentina will continue to use the yuan to pay for Chinese imports valued between $790 million and $1 billion.
In January of this year, Argentina’s central bank announced that Argentina and China had formally expanded their currency swap agreement. This move will strengthen Argentina’s foreign exchange reserves, which already include ¥130 billion ($20.3 billion) in Chinese yuan, and activate an additional ¥35 billion ($5.5 billion) in available yuan quota.
Sudan Situation Deteriorates; Shipping Companies Close Offices
On April 15th, conflict suddenly erupted in Sudan, an African nation, with the security situation continuing to worsen.
On the evening of the 15th, Sudan Airways announced the suspension of all domestic and international flights until further notice.
On April 19th, shipping company Orient Overseas Container Line (OOCL) issued a notice stating that it would cease accepting all Sudan bookings (including those with Sudan in the transshipment terms) effective immediately. Maersk also announced the closure of its offices in Khartoum and Port Sudan.
According to customs data, the total import and export value between China and Sudan reached ¥194.4 billion ($30.4 billion) in 2022, an accumulated increase of 16.0% compared to the same period last year. Among this, China’s exports to Sudan amounted to ¥136.2 billion ($21.3 billion), a year-on-year increase of 16.3%.
Given the potential for the situation in Sudan to continue deteriorating, local businesses’ production and operations, personnel mobility, normal shipping and receipt of goods and payments, and logistics may all be severely impacted.
Companies with trade connections to Sudan are advised to maintain contact with local clients, closely monitor the changing situation, prepare contingency plans and risk prevention measures, and avoid any economic losses that may result from the crisis.
Post time: May-03-2023