Introduction

Once the pandemic shook the market in February-March last year, one of the effects of the initial massive demand for Dollars was to push the USD/CNY at levels prevailing during the financial crisis in 2008, above 7.15 level. Since then, the Renminbi gradually recovered and overall has gained 10% since June, to close 2020 with an appreciation of more than 6% versus the USD. It has recently hit the highest level against the Dollar since June 2018, breaking 6.50 level and currently trading below it.

The attached report reviews the driving factors for this movement as well as looking at the outlook for the Chinese currency and the USD/CNY rate.