USD/CNH softens as PBOC fix signals RMB strength – OCBC

USD/CNH remains offered after a softer USD/CNY fixing, the lowest since May 2023, reinforcing policymakers’ signal toward a gradual RMB appreciation path. USD/CNH last seen at 6.9668, OCBC's FX analysts Sim Moh Siong and Christopher Wong note.

PBOC comfort with RMB appreciation caps USD/CNH

"USD/CNH continued to trade with an offered tone amid softer USD/CNY fixing. Yesterday fix was set at 7.0064 (vs. 7.0120 on Wed). This is also the lowest USD/CNY fix set since May 2023. We reiterate that stronger CNY fix continues to be a key signaling tool in guiding RMB on an appreciation path."

"PBOC deputy Governor Zou Lan said there is no need to gain a competitive advantage in international trade through currency depreciation. He mentioned that the break of 7-threshold was due to USD weakening and easing tensions between US and China. The comments suggest that policymakers are likely comfortable with the pace of RMB appreciation. We continue to expect measured pace of RMB appreciation unless circumstances change."

"Daily momentum is mild bullish while RSI eased lower. Sideways trading likely to persist in the interim. Support at 6.96/6.97 (double bottom). Decisive break may accelerate the decline, with next support closer to 6.9460/6.95. Resistance at 6.9920 (21 DMA), 7.03 levels."