Chinese Yuan: Policymakers guide measured RMB appreciation – OCBC

OCBC’s Sim Moh Siong and Christopher Wong highlight that USD/CNH is trading near recent lows as Chinese policymakers allow a measured pace of Renminbi (RMB) appreciation while resisting an overly rapid move via a sizeable fixing premium. Weaker July credit data reinforce domestic-demand concerns, but exporter conversions, fixing bias and a softer US Dollar (USD) are seen as offsets, with support at 6.74/6.72 and resistance near 6.7580/6.7730.

RMB near strongest levels since early 2023

"RMB continue to trade near its strongest levels since early 2023. Friday’s USD/CNY fixing of 6.7878 was the lowest since Feb 2023 but was still around 460pips higher than the Bloomberg fixing survey and about 430pips higher than where USD/CNH spot was trading."

"The message remains consistent with policymakers allowing for measured pace of RMB appreciation but continue to lean against an overly rapid move."

"On the data front, China’s weaker than expected credit data added to concerns. New yuan loans totalled CNY10.38tn for year-to-date to Jul, down from CNY12.87tn the same period a year ago while on MoM basis, the implied estimation was a contraction of CNY340bn in July. New aggregate social financing totalled CNY22.25tn year-to-date Jul, down from CNY23.9tn same period a year ago."

"This reinforces concerns over weak domestic demand. But for FX, exporter conversions, the fixing bias and broader USD/ sentiments remain important offsets."

"USD/CNH was last at 6.7450 levels. Momentum and RSI indicators are flat. Support at 6.74, 6.72 levels. Resistance at 6.7580 (21 DMA), 6.7730 (50 DMA)."

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