USD/CNY: There is still room for Yuan to strengthen – Commerzbank

USD/CNY largely fluctuated between 6.86 and 6.98 in the past three weeks. According to economists at Commerzbank, the Yuan still enjoys upside potential.

Government reshuffle is completed

“The government reshuffle during the annual session of National People’s Congress (NPC) marked the end of the latest five-year political succession. It is widely believed that under the new leadership line-up, the Communist Party will have a tighter grip on the government.”

“An extensive restructuring plan was also unveiled during the NPC meeting, as the government undergoes a reorganization every five years. A highly centralized system may increase top-down efficiency. But it also increases the risk of making severe policy mistakes.”

“Beyond the near term, there is still room for CNY to strengthen modestly against the Dollar should future data show robust post-reopening recovery which will boost market confidence.”