Nomura: Expect the yuan to strengthen only slightly despite multiple tailwinds

Currency Trends - The People's Bank of China (PBOC) is fine-tuning tools to manage currency movements, with the yuan showing a strong appreciation trend recently [2][3] - China's trade surplus over the last 12 months has been robust, contributing to the yuan's strength, while the dollar has weakened [3] - The expectation is for the yuan to appreciate mildly, with a target of around 6.7% by the end of the current quarter [4][5] Internationalization of the Yuan - Discussions are ongoing regarding the internationalization of the yuan, despite existing capital controls, with potential strategies including making Hong Kong equities tradable in RMB [5] - Structural changes in global trade and finance may necessitate more flexibility for the yuan, although currency strength does not directly correlate with internationalization efforts [6][7] Fiscal Policy and Economic Outlook - Fiscal policy is seen as crucial for bridging the gap in the economy post-property market challenges, with expectations for increased fiscal measures to stimulate growth [10][11] - There is a need for frontloading fiscal policy in Q1 to address poor consumption and investment starts, with market expectations not being overly high [12][13] - Investors are closely monitoring how the government balances domestic economic stability with external geopolitical factors [14]