Chinese Yuan: Rangebound trade guided by fix against US Dollar – OCBC

OCBC strategists Sim Moh Siong and Christopher Wong see USD/CNH staying broadly rangebound as the People's Bank of China (PBoC) fixing continues to anchor moves. Softer US inflation has recently weighed on the Dollar while firmer fixings allowed some gradual Renminbi (CNH) strength. However, subdued domestic growth and expectations of policy easing are seen limiting the extent of RMB gains in the near term.

Fixing keeps Renminbi in tight band

"USD/CNH fell to a recent low mid-week as softer US inflation data weighed on the USD and firmer PBoC fixings helped to reinforce the move, but the pair subsequently rebounded modestly in the week’s close."

"Near-term direction continues to take its cue from the daily fix alongside broader USD moves."

"Recent fixing guidance suggests policymakers are comfortable allowing some gradual RMB strength to come through but not necessarily signalling a push for a sharper appreciation move at this point."

"For now, we expect USD/CNH to remain broadly rangebound, with the fixing continuing to anchor the pace and direction of moves while softer domestic growth and policy-easing expectations limit the extent of RMB gains."

"Mild bearish momentum on daily chart intact but shows tentative signs of it fading while RSI rose."