By the end of last year, most experts believed that the yuan was going to keep falling. Reports by an analyst at Deutsche Bank showed that they expected the yuan to keep depreciating further through 2017 and 2018. In fact, they believed that the yuan would depreciate to 7.4 in 2017 and 8.1 in 2018. Instead, we are now experiencing the opposite, with more than a 6% rate of appreciation against the US dollar. So much so that analysts have now revised their CNY forecast positively.
At the time DB were predicting further depreciation, capital outflow from China was at an all-time high. In mid-2016, about $60 billion was leaving China per month, decreasing their forex reserves to $3 trillion. This was the main reason for the yuan’s depreciation, and many analysts believed it would continue to hurt the CNY forecast. In January, though, the People’s Bank of China (PBoC) decreased the yuan’s midpoint from 6.9526 to 6.9307. further capital controls were set to take effect in July, and these further decreased capital outflow.