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Today's USD/CNY fixing represented the...>

CHINA YUAN
CHINA YUAN: Today's USD/CNY fixing represented the 3rd consecutive fixing <
CNY7.00, as reminder, the fix hadn't fixed < CNY7.00 since Aug (prior to this
string). This shows that the PBoC is happy with the level of USD/CNY at present
& if anything leant on the fixing a little after USD/CNY closed above CNY7.0100
(prev. day's CNY closing price is the biggest input in the fixing model).
- Most bank models that we have seen point to a "fair value" of USD/CNY at
CNY6.95-CNY7.00 (purely based on U.S. tariff levels) in the case of a roll back
of the tariffs that the U.S. levied on China in Sep. Looking ahead, tariff
measures/phases of a trade deal will be integral for USD/CNY performance, with
the trade war dominating local data & MonPol developments at present.
- PPI deflation & underwhelming core CPI (~+1.5% Y/Y), in spite of surging
headline CPI (pork prices), and a stronger CNY combined to give the PBoC enough
space to implement a 5bp cut in the rate it applies to its MLF (last Tuesday).
Looking ahead, the aforementioned PPI deflation, shrinking industrial profits &
trends in credit data should facilitate further PBoC easing.
- Chart: https://emedia.marketnews.com/CNY121119.png
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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