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Analysts at Westpac suggest that the USD/CNY is likely to continue to trade in a range of 6.71/6.77 near-term, and if this is broken then they will be looking at 6.69/6.80.

Key Quotes

“CNY rates, bond yields and forward points had been rising steadily in response to the upbeat March data (including PMI, aggregate financing/new yuan loans, and industrial profits) and the subsequent changing monetary expectation, before the disappointing April PMIs. Spot RMB, on the other hand, has been fairly insensitive to economic data releases, probably as the macro picture is seen staying pretty much the same, and FX stability remains desirable.”

“Indeed, USD/CNY has been trading in a tight range of 6.69/6.79 in the past three months. Recent data on FX settlement suggest continued balance outflow versus inflow pressure.”

“China’s Xi said “China will not pursue a yuan devaluation that harms others”, and “China does not deliberately go for trade surplus”. The trend is for C/A surplus to shrink further, or even turn into deficits, and capital inflows are there to plug the hole, in our view. A stable RMB will help support capital inflows, while not hurting exports further.”