PBoC Wary Of Market Expectations Surrounding Further Yuan Weakness

MNI (London) - Post-PBoC MPC meeting communique provides no real change in tone on the monetary policy front, although the Bank deploys a slightly firmer round of rhetoric when it comes to fighting CNY weakness.

• The Bank vowed to stabilise CNY FX expectations, with greater focus on the counter-cyclical adjustment factor. The Bank also highlighted the need to use comprehensive policies on this front.
• USD/CNH slipped to 7.2908 vs. levels closer to 7.30 ahead of the release, before recovering to 7.2930 last.
• The cross has printed above 7.30 on a couple of occasions in recent days. Wednesday’s high (7.3077) represents the ’24 high.
• Support comes in at the June 25 low (7.2763), while a resumption in the move higher would target the November 13 ’23 high (7.3108).
• Some had deemed the recent, slow drift higher in the USD/CNY mid-point fixing as an implicit signal that the PBoC was ok with gradual yuan weakening vs. the USD. This language provides some very modest push back against that idea..
• Still, the change in PBoC tone isn’t particularly forceful, while the PBoC is already deploying a fairly sizeable counter-cyclical adjustment factor in its CNY fix, explaining the limited move in CNH.
• The broader CFETS RMB index is actually firmer YtD.