Chinese Yuan: Measured RMB appreciation with two-way risks – OCBC

OCBC Bank strategists Sim Moh Siong and Christopher Wong highlight that USD/CNH has edged higher alongside a broader US Dollar (USD) rebound and firmer US Treasury yields, while the People's Bank of China (PBoC) continues to prefer a gradual appreciation path. Mild bearish momentum persists but a modest rebound cannot be ruled out, with resistance at 6.7410–6.75 and support at 6.72–6.70. Geopolitical risks around Iranian Oil and potential secondary sanctions could add Renminbi (RMB) volatility.

PBoC keeps RMB gains controlled

"USD/CNH edged higher as the broader USD recovered and US Treasury yields ticked up overnight, though the move remained relatively contained."

"Beyond the near-term macro backdrop, renewed US pressure on Iran adds another source of uncertainty for RMB given China’s role as a major buyer of Iranian oil."

"USD/CNH last seen at 6.7225 levels. Mild bearish momentum on daily chart intact though RSI is showing tentative signs of turning higher from oversold conditions. Modest rebound not ruled out. Resistance at 6.7410 (21 DMA), 6.75 levels. Support at 6.72, 6.70 levels."

"The immediate FX impact should remain limited so long as measures stop short of directly targeting major Chinese financial institutions, but any escalation in secondary sanctions towards Chinese firms or banks could weigh on sentiment and introduce more two-way volatility."

"Separately, the PBoC continues to signal a preference for a measured pace of appreciation through a sizeable fix-versus-expectation gap, suggesting policymakers remain wary of allowing RMB strength run too quickly."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)