August 29, 2024 22:13 GMT
USD/CNH Slumps Under 7.1000 As Exporters Step Up Selling, Official PMIs Print Tomorrow
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USD/CNH got to lows just under 7.0850 post the Asia close on Thursday. This was just above earlier August lows (7.0838). We track slightly higher in early Friday dealings, last around 7.0920. Still, CNH was 0.54% firmer for Thursday's session, significantly outperforming broader USD index gains (DXY +0.28% etc). Spot USD/CNY finished up at 7.0970. The CFETS CNY tracker rose a modest 0.11% to 97.61 per BBG.
- Bloomberg noted that exporters were reportedly strong USD sellers in the offshore market yesterday (see this link). This is something we hinted could be driving yesterday's sharp move lower in the pair, given lack of other macro drivers.
- The focus will now be on such follow up flows, with a break sub 7.1000 potentially driving more exporters to convert FX receipts back into yuan. Barclays suggests we could see as much as $200bn in conversion.
- The USD/CNY fix will also be in focus, to see any degree of pushback from the authorities in terms of the fixing bias on this recent yuan appreciation.
- The official PMIs print tomorrow for August. The market expects the manufacturing PMI to edge up to 49.5 from 49.4, services to be at 50.1, versus 50.2 prior.
- Cross asset sentiment remains broadly negative from an equity market standpoint, with on-going growth headwinds a factor. The PBoC Governor stated yesterday the central bank will study more ways to boost the economy (see this link).
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