As global markets navigate complex economic landscapes, investors are keen to determine which currency will hold the strongest position in 2024—the U.S. dollar (USD) or the Chinese yuan (CNY).
In light of this, Finbold reached out to ChatGPT-4o to gain insights on this pressing question, taking into account recent market trends and economic data.
Current market trends
China’s yuan has experienced fluctuations but remained relatively steady, trading at 7.2 CNY per USD recently. Despite this stability, the yuan has fallen around 2% against the dollar so far this year
The People’s Bank of China (PBOC) set the midpoint rate at 7.11, slightly firmer than the previous fix, allowing the yuan to trade within a 2% band.
Meanwhile, the U.S. dollar is hovering near an eight-week low, influenced by the U.S. nonfarm payrolls report, which is expected to guide the Federal Reserve’s interest rate decisions.
Analysts predict that job growth will impact the Dollar Index (DXY) and U.S. Treasury yields, potentially stabilizing the dollar in the short term.
Moreover, according to the Official Monetary and Financial Institutions Forum, global reserve managers are increasingly favoring the USD over the CNY due to higher returns and geopolitical stability.
The U.S. 10-year Treasury note offers a yield of around 4.5%, significantly higher than China’s 10-year bond yield of 2.3%. This disparity makes the dollar a more attractive investment for many, as reported by Reuters.
Geopolitical tensions and economic performance
Recent data from China showed robust export growth for the second consecutive month, reflecting sustained global demand for Chinese goods. However, imports showed a significant slowdown, highlighting underlying economic challenges.
Additionally, Western officials have raised concerns about smaller Chinese banks facilitating trade with Russia, potentially evading sanctions.The Group of Seven (G7) is expected to address this issue at their upcoming summit, emphasizing the geopolitical risks that could impact the yuan.
The Wall Street Journal reported that U.S. lawmakers are advocating for a ban on Chinese battery companies linked to major automakers like Ford and Volkswagen, alleging forced labor in their supply chains.
Such actions can significantly impact investor sentiment towards the yuan, especially if the geopolitical landscape remains fraught with tension.
ChatGPT-4o’s Prediction
ChatGPT-4o suggests that the U.S. dollar is likely to remain stronger than the yuan through 2024, primarily due to the higher yield environment in the U.S. and ongoing geopolitical risks affecting China.
The key factors supporting this prediction include the robust performance of the U.S. economy, the Federal Reserve’s monetary policies, and the geopolitical uncertainties impacting China’s economic stability.
While both currencies have their unique challenges and advantages, the U.S. dollar appears to be the stronger currency heading into 2024. The dollar’s higher yields, coupled with geopolitical stability, make it a more attractive option for global reserve managers.
Investors should continue to monitor economic indicators, central bank policies, and geopolitical developments to make informed decisions.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
