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According to Frances Cheung, analyst at Westpac, near-term resistance for USD/CNY is at 7.20.

Key Quotes

“The economic backdrop – with persistent impact from tariffs on trade flows, which filters through onto production and investment – should put upward pressure on USD/CNY, and we maintain our year-end forecast of 7.30.”

“We are not more bearish RMB than this as the still stable onshore RMB sentiment and expected continued bond inflows are likely to check RMB weakness. Foreign buying of onshore CGBs (China Government Bonds) rose to CNY53.2bn during September (CNY88bn into all CNY bonds), the biggest monthly purchase since August 2018.”

“Index inclusions can potentially bring in up to CNY50bn of monthly purchase of CNY bonds, we estimate. Most of the flows are likely to go into CGBs and PFBs (policy financial bonds) before newcomers become more familiar with the Chinese credit market.”