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Frances Cheung, Research Analyst at Westpac, notes that the PBoC skipped OMO on Thursday, and hence there is no confirmation on a rate hike or not.

Key Quotes

“There is no regular monetary policy meeting in China, which means the authority can adjust rates any time. Skipping OMO today per se does not have an implication on future rates move.”

“Our view remains that there is minimal pressure for the PBoC to hike OMO rates given the narrow spreads with market rates. The rates market is likely to turn quiet going into the week-long holidays.”

“PBoC measures have managed to stabilise the RMB, and we expect USD/CNH to trade in ranges in the week ahead. If USD/CNH breaks the 50DMA at 6.85 then the next support is 6.79. Upside resistance remains at 6.96.”  

“The FX balance by banks on behalf of clients became more negative showing an outflow of USD9.25bn in August, versus an outflow of USD0.43bn in July. Nevertheless, the outflows via forward contracts narrowed by USD10bn. Overall, there is no heightened risk of capital outflows, contributing to the stabilization in the RMB.”