Chinese Yuan: Appreciation outlook remains constructive – OCBC

A constructive outlook for the Renminbi (RMB) remains in place at OCBC, where strategists Sim Moh Siong and Christopher Wong point to steady, measured appreciation. Onshore spot and the CFETS index stand at four-year highs, while the People's Bank of China (PBoC) is steering the fixing stronger. The strategists highlight a downside bias in USD/CNH technicals and identify support levels. Meanwhile, China’s Fifth Plenum reiterated growth targets but announced no fresh stimulus, suggesting policymakers remain comfortable with a gradual strengthening of the RMB.

Does a stronger fixing support further measured RMB gains?

"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.)