Chinese Yuan: OCBC Retains Constructive Bias Towards Appreciation

Onshore Renminbi (RMB) spot and the CFETS index are at four-year highs. OCBC strategists Sim Moh Siong and Christopher Wong characterise the currency’s appreciation as gradual but sustained, with the People's Bank of China (PBoC) steering the fixing higher. Their outlook remains constructive, supported by a downside bias in USD/CNH technicals and identified support levels. China’s Fifth Plenum reiterated growth targets but announced no fresh stimulus, suggesting policymakers are comfortable with gradual RMB appreciation.

Gradual RMB appreciation, firmer fixing

"RMB extended its appreciation, with onshore spot reaching a fresh 4-year high against USD. Strength was also evident on a trade-weighted basis, with the CFETS RMB index trading around 4-year highs."

"Meanwhile, PBoC continued to guide the fixing gradually stronger, suggesting that policymakers remain comfortable with further RMB appreciation, albeit at a measured pace. The RMB’s resilience is notable given that USD has remained relatively firm against other major currencies."

"We retain a constructive bias on RMB. The steady progression in the fixing suggests little inclination from policymakers to reverse the appreciation trend, although the pace may moderate. Resilient US growth and still-elevated inflation could lend support to USD near term, but this need not derail RMB’s appreciation trajectory."

"USD/CNH last seen at 6.6580 levels. Mild bearish momentum on daily chart intact while RSI fell into oversold conditions. Risk of snapback not ruled out especially if fixing momentum upsets."

"But broad bias remains skewed to the downside for now. Next support at 6.65 before 6.62 levels. Resistance at 6.6830 (21 DMA), 6.70 (50 DMA)."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)