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China’s yuan is forecast to move only a little and trade steady in the coming months as forecasts in the range of the currency becomes even tighter.

This comes as authorities keep a tight leash on the currency until it becomes clear whether the trade spat with the United States will get worse.

Despite the severity of the dispute and the potential to disrupt trade flows elsewhere, the range of yuan forecasts is even tighter than it was in polls taken in April and at the start of the year, reflecting the caution. Also, the move in the extremes of the range suggests a gradual appreciation in the yuan.

Meanwhile, the resurgent U.S. dollar is at its strongest on over three months but is still down more than 2 percent so far in 2018 against the yuan.

The yuan is forecast to trade steady at 6.37 per dollar in three months, according to a survey of over 60 foreign exchange analysts taken from May 3 to 9. The currency is predicted to trade at 6.36 in a year.

U.S.-China Trade Tensions

Chinese officials are expected to meet their U.S. counterparts in Washington for the second round of negotiations next week, after talks last week in Beijing highlighted by a list of aggressive U.S. demands.

The risk of a trade war between the United States and China threatens to curb the economic momentum created by years of policy stimulus.

Yuan Forecasts

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According to a poll on currency positioning taken last week, bullish bets on the Chinese yuan fell to the lowest since October in the previous two weeks. However, the survey did not point to any sharp depreciation in the yuan.

A majority of strategists forecast the yuan to rise. That includes two respondents predicting it to strengthen sharply to 6.0 per dollar or lower, a rate not seen since China unified its dual exchange rates, officially devaluing the yuan overnight by 33 percent in January 1994.

To counter capital outflows following an interest rate hike from the U.S. Federal Reserve on March 21 the Chinese central bank raised its seven-day rate the day after and its 14-day rate in April.

That is a clear signal Beijing is watching policy moves across the globe and is ready to contain capital outflow risks.

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