PBoC Easing Eyed

USD/CNH continues to stick to recently observed CNH6.35-6.40 range (in loose terms), last dealing little changed just above CNH6.3900. Focus is squarely on the previously flagged PBoC matters (the latest MLF operations and speculation surrounding the potential for an after-market RRR cut).

• China’s domestic economic activity has been hampered by the localised COVID restrictions in play across large chunks of the country, which presents headwinds for the yuan, while the well-documented narrowing of U.S./China rate differentials adds to that impetus, in addition to adding credence to the idea that the window for policy easing has narrowed. Pro-growth policy remains at the fore in the Chinese policymaking sphere, but the central bank is seemingly being pushed to act before it is too late.
• Initial resistance lies at the March 15 high (CNH6.4108), while support is seen at the March 31 low (CNH6.3452).