Expect a stronger yuan against the dollar as Chinese economy grows stable

The Chinese yuan traded at 6.8648 to a US dollar in intraday trading in the offshore market on Jan 5, up 900 basis points compared with its lowest mark set the previous day, which was its biggest one-day gain in almost a year.

A Bloomberg report on Dec 28 saying that onshore yuan had dropped below the key 7 defensive line against the dollar, which China's central bank immediately condemned as "irresponsible" media reporting, continued to trigger concerns over a latent acceleration in the yuan's depreciation even in the first week of January.

The real changes in the exchange rate market, however, were about a stronger US dollar, not a weaker yuan. This is not a word game. The recent depreciation of the yuan is a reasonable response to a stronger dollar after Donald Trump won the presidential election in the US and the possibility of the Federal Reserve raising interest rates.