USD/CNH moved off a peak close to 7.2700 amid a fresh round of PBoC verbal jawboning overnight. This rhetoric, combined with a sharp pull back in broader USD sentiment, drove the pair back below 7.1500 late in NY. We are back above 7.1600 now, but this is still close to 1.5% below overnight highs. The domestic data calendar remains quiet today, with focus on tomorrow's PMI prints.
- PBoC rhetoric came after a meeting of China's FX market self-regulated body, which the central bank attended. The central bank warned against betting on one-way yuan moves and stated that such positions will lose out in the long term.
- It also called on banks to safe guard the fixing mechanism and curb volatile moves in the FX rate.
- Such a backdrop will increase focus on today's fixing outcome. Recall yesterday we had a surprise of just -444pips in USD/CNY terms (actual of 7.1107 versus Bloomberg consensus of 7.1551), much lower compared to previous sessions. This was one catalyst for higher USD/CNH and USD/CNY levels yesterday.
- Onshore spot ended yesterday at 7.2005, but the 4:30pm level (used for fixing estimates) came in higher at 7.2458. Still, there should be some offset from much weaker USD levels.