USD/CNH Moves Further Away From Cycle Lows

Spot USD/CNH has continued to move away from its two-year low today, as the DXY extended gains (though now operates off earlier highs), while the redback has struggled to gain any broader strength. The rate sits +45 pips at CNH6.6747 at typing.

• The PBoC fix came at CNY6.6703, slightly below the BBG estimate of CNY6.6717.
• Chinese State Administration of Foreign Exchange (SAFE) said that the yuan has been more stable than expected and its appreciation in 2020 has been relatively moderate, driven by fundamentals. SAFE noted that the yuan's flexibility has been improved and the exchange rate can be expected to fluctuate in both directions.
• Worth revisiting yesterday's report ran by Caixin, which noted that china is preparing to grant additional quota for funds to invest in securities overseas, effectively allowing for larger capital outflows. An unidentified SAFE official reportedly told Caixin that the Qualified Domestic Institutional Investor Quota will be raised by $10bn in the near term.
• BBG have just ran headlines with comments from Chinese Pres Xi, who warned that "extreme pressuring" will not work against China, adding that Beijing will not allow anyone to invade or separate the country.
• Bulls look for a move through Oct 15 high of CNH6.7324 before taking aim at Oct 13 high of CNH6.7653. On the downside, focus remains on Oct 21 cycle low of CNH6.6278 and a break here would clear the way to the 61.8% retracement of the 2018-2020 rally/round figure support at CNH6.6030/00.
• China reports its industrial profits next Tuesday.