Analysts at Rabobank point out that we started the day in Asia with USD/CNH at 6.6450 and that came on the back of CNY fixing 391 pips lower yesterday at 6.5960, the biggest cut since January 2017.
Key Quotes
“In short, we are fast approaching the psychological 6.70 level (as well as the Omen-ish 6.66), which market chatter suggests the PBOC will defend. However, if it wants to send a strong message it might opt to let it fall as far as 6.80.”
“Yes, one can just say that all we are seeing in China is a belated catch-up with what other EM FX have been doing against the USD for some time now: but why now exactly, and not six weeks ago, for example? If this is all a warning to the US of a ‘nuclear’ currency option then perhaps 6.80 is a nice place for the PBOC to halt, while keeping a finger on the red button.”
“Risks are rising that we get to at 6.80 due to domestic fundamentals alone.”
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