(Yicai Global) Jan. 16 -- A wealth management arm of Swiss investment bank UBS has adjusted its prediction of the Chinese yuan to get even stronger against the US dollar this year as the country overcomes the Covid-19 pandemic.

The foreign exchange rate should be CNY6.5 per dollar on Sept. 30, as well as on Dec. 31, firmer from the earlier prediction of CNY6.7, MT Newswire reported recently.

UBS Wealth Management even revised its previous estimate of the exchange rate to be CNY6.6 on March 31, stronger from CNY6.9. On June 30, the rate might be CNY6.6 instead of CNY6.8.

The onshore rate of the redback appreciated to a point below CNY6.7 per US dollar today from around 7 early this year. The rate was 6.6980 per dollar as of 11.10 a.m. while the offshore reading was 6.7062.

The Chinese economy may grow more than expected in the second half of this year amid reopening efforts, the Zurich-headquartered financial institution said. The rising market optimism and the improved growth outlook should stimulate funds to flow into Chinese risk assets, it added.

Moreover, the US Federal Reserve's rate hike cycle may end as labor data and wage growth have begun to soften, UBS said. Divergence of growth prospects in China and the US will help the Chinese yuan to appreciate, it added.

Policy rates in the States may peak at around 5 percent, and the American central bank may need to make the first rate cut by year-end, UBS said. A reversal of the driving factors of the US dollar should help the redback to get firmer. Moreover, investors holding US dollars may refrain from speculation and consider joining a future appreciation round of the yuan.

However, Chinese exports may face slowdown pressures with the rising expectation of recession overseas, some analysts predict. Consequently, the huge surplus of China's current account in the past two years might disappear, which could drag down the value of the renminbi.

In US dollar terms, Chinese exports will fall 4 percent in 2023 from 2022, dragging down this year's gross domestic product and exchange rate, Wang Tao, chief China economist at UBS, told Yicai Global recently.

However, Wang still expects the Chinese yuan to rise in value against the greenback this year. The relative growth rate of the world's two biggest economies, as well as the greenback’s development, are more important than the scale of the current account surplus, Wang explained.

The US dollar has started to depreciate against the Japanese yen and the euro, and the spread of the two currencies of China and the US has begun to shrink with the recovery of market confidence in China, she added.

Editors: Xu Wei, Emmi Laine, Xiao Yi