CNY - CNY: Second-Guessing The PBOC Proves A Challenge
2024-03-25 12:05:00 ET
Summary
- Friday's move in USD/CNY raised speculation that the PBOC was preparing to allow a new period of weakness for the renminbi. Today's market activity suggests otherwise.
- USD/CNH dropped sharply from around 7.28 before the fixing to just below 7.24 - but is starting to creep higher again.
- We believe that though short-term factors do favour a slightly weaker RMB, any depreciation that we get will be gradual and controlled.
By Chris Turner & Lynn Song
Friday's CNY move gets partially unwound
Last Friday saw significant movement in the USD/CNH pair after the People's Bank of China raised its USD/CNY fixing by the largest amount since the start of the year, allowing for the USD/CNY onshore pair to trade through 7.20 for the first time since November. Markets speculated that this was a key moment indicating that the PBOC was finally willing to let the RMB weaken after ramping up the use of the counter-cyclical factor (the level to which they push back against depreciation) since the start of the year....
CNY: Second-Guessing The PBOC Proves A Challenge