USD/CNH Dips Sharply As PBoC Vows FX Stability

(MNI Australia) USD/CNH moved sharply lower post the Asia close on Thursday. From the 7.3400/50 region we pulled back sub 7.3000 in short order before sentiment stabilized. We spent the rest of the offshore session oscillating between 7.3000-7.3200. The pair currently tracks near 7.3040. USD/CNY spot closed at 7.2866, well away from earlier highs (~7.3175). The CNY NEER (J.P. Morgan index) rose 0.16% to 121.41.

• The CNH rebound coincided with the release of the PBoC's quarterly monetary policy report, where the central bank pledged it would avoid excessive movements in the yuan and stated it has the policy tools to safeguard a stable FX market.
• Bloomberg also reported on State banks stepping up selling of USDs to curb the rate of yuan depreciation (see this link for more details). This has been a theme highlighted by Bloomberg and Reuters in recent sessions.
• The PBoC also stated it would step up macroeconomic policy adjustment, which hints at potential further easing steps in the period ahead to support the economy.
• Focus is likely to remain on the 7.3400/7.3500 region as a USD/CNH resistance point. Note on the downside we don't hit the 20-day until back near the ~7.2450 level.
• The data calendar has July FDI figures on tap today. In the equity space, to recap the CSI 300 rose 0.33% Thursday for the index to finish at ~3831, while in Thursday US trade the Golden Dragon index added 0.26%.