Deutsche Bank forecasts yuan to appreciate against USD

The Chinese currency Renminbi, or yuan, will appreciate against the U.S. dollar by roughly 2 to 3 percent in 2014, Deutsche Bank forecast on Monday.

The bank also predicts that yuan cross-border trade settlement will increase by about 50 percent to 6 trillion yuan, or approximately 20 percent of China's global trade volume.

Deutsche Bank strategists expect financial deregulation to propel the market forward next year.

They anticipate policy breakthroughs such as reforms within the Shanghai Free Trade Zone, more clearing banks in Europe and/or other regional centers and the relaxation of Renminbi supply to the offshore market. The strategists also expect further relaxation of foreigners' access to onshore capital markets in China.

As Renminbi business continues to expand globally, the bank expects foreign exchange (FX) market turnover to receive a further boost in the year ahead.

The bank forecasts that after almost doubling in 2013, Renminbi FX daily trading volume will rise to 4 to 4.5 billion U.S. dollars in the spot market and 7 to 7.5 billion U.S. dollars in forwards or FX swaps in 2014. The total offshore deposit base is expected to reach 2.25 trillion yuan by the end of next year.

"The growth spurt in the Renminbi market in 2013, driven by policymakers' intensified efforts to relax the capital account and increase use of the currency in other regional centers, will position the yuan well for continued development next year," said Linan Liu, Deutsche Bank Greater China rates strategist.

He added that 2014 will be characterized by transition to a new market development stage underpinned by significant expansion, rapid product innovation, increased market liquidity and more efficient pricing discovery for all offshore Renminbi products.

http://www.ecns.cn/business/2013/12-16/92801.shtml