US election and jobs data put pressure on China’s yuan as stimulus measures support it: analysts

Analysts said on Monday that China’s yuan will face volatility due to an expected boost from Beijing’s stimulus package, while also facing pressure from the United States ahead of the Nov. 5 presidential election.

The yuan would appreciate against the U.S. dollar if there were “significant fiscal easing” as part of Beijing’s stimulus measures, Goldman Sachs analysts led by Xinquan Chen said in a research note, while noting that this would increase depreciation pressure could be offset by possible US trade tariffs increases.

Meanwhile, other analysts said robust U.S. jobs data could provide more support for the dollar, as could the election outcome.

“A rapid appreciation of the yuan could lead to increased foreign exchange settlements by exporters, thereby triggering a recovery [the yuan] against trading partners’ currencies and could, in our view, hurt China’s export growth [People’s Bank of China] “I would want to avoid that,” Goldman Sachs analysts said.

China’s central bank said in September it would “protect against the risk of exchange rate overshooting.”

Many Chinese exporters have been hoarding U.S. dollar-denominated assets to seek higher returns, but in recent months they have appeared increasingly inclined to convert them into yuan assets amid the yuan’s appreciation.