USD/CNH Hits Lowest Level Since June ’23, Exporter Demand Eyed

Most continue to point to Chinese exporter demand for the yuan, given apparent hoarding of offshore FX during previous instances of yuan weakness.

• One analyst suggested that Chinese companies could convert as much as $1tn of offshore capital.
• Goldman Sachs were more cautious, pointing to ~$400bn of hoarding by Chinese exporters over the last 2 years, while they highlighted the still wide U.S.-China rate differentials and weak Chinese sentiment as headwinds for the yuan.
• Elsewhere, Societe Generale are not “convinced that offshore capital will be repatriated easily given how tight capital controls are and how rich Chinese citizens always looking to move money overseas.”
• While exporter flows may not be as forceful as some have suggested, such speculation has helped turn sentiment, adding to the bearish USD theme of recent weeks.
• This has allowed the PBoC to reduce support for the yuan, with the latest RTRS sources report even suggesting that state-backed banks are now buying the USD in an attempt to slow the pace of yuan appreciation.
• USD/CNH bears now target the June 2 ’23 low (7.0670).