Yuan Keeps Weakening In Defiance Of Firmer Than Expected PBOC Fix

Offshore yuan has extended its sell-off and is headed for its worst week since August 2019. The redback has shrugged off the PBOC's pushback against its sharp depreciation expressed in the daily fixing of permitted USD/CNY trading band mid-point. Spot USD/CNH ticked lower after China's central bank set the yuan reference rate ~50 pips below the expected level, before staging a firm rebound and narrowing in on the CNH6.5000 mark.

• The rate last changes hands +120 pips at CNH6.4928 and a clearance of CNH6.5000 would shift focus to Aug 20, 2021 high of CNH6.5102. Bearish focus falls on the 200-DMA, which intersects at CNH6.4016.
• PBOC Gov Yi said that "accommodative monetary policy is stepping up support for the real economy" amid intensifying headwinds to growth. The central bank "also stand ready to support SMEs with more instruments if needed."
• Shanghai authorities said that they would lift lockdown in China's most populous city in batches once Covid-19 transmission outside quarantined areas was eliminated. They will also ramp up enforcement of existing lockdown rules through a suite of specific measures to that effect. Meanwhile, the city's Vice Mayor noted that 70% of key industrial firms have already resumed operations.