Benign CNY Fixing Trend Out of Line With Recent Yuan Weakness

The offshore yuan, CNH and onshore spot, CNY, have both lost close to 3% since the start of February. This is broadly in line with USD trends over the same period, with the DXY up 2.5% over this period, likewise for the BBDXY, up 2.40%. This translates into modest yuan underperformance, but only at the margins. The CFETS RMB index is down slightly off recent highs.

• This may explain why the USD/CNY fixing bias has remained close to neutral despite the recent run higher in USD/CNY.
• The rolling 5 day sum of the fixing error (the difference between the actual fix and the Bloomberg consensus) is close to flat at -13pips after today's fix. The two-week sum of this term is slightly wider at -45pips, and wider still for the past month -149pips.
• Still, this is relatively benign compared to the weakness seen in CNY versus the USD recently. The chart below overlays rolling 1 month changes in CNY/USD versus the rolling 1 month sum of the fixing error.
• We would normally expect to see a wider fixing error given the recent degree of CNY weakness, at least based the history of recent years.
• As noted above, this may reflect the relatively steady CFETS RMB levels. It may also reflect outright USD/CNY levels, i.e. a move 7.00 may see the bias shift back towards leaning against depreciation pressures. This may be a focus point, if we break above 7.00, in and around the upcoming People's Congress.

Fig 1: CNY Fixing Error Trend Benign Despite Recent Yuan Weakness

Source: MNI - Market News/Bloomberg