USD/CNH Tags A Fresh Multi-Month Low Before Recovering

MNI (London) - A modest uptick in the BBDXY allowed USD/CNH to pull away from session lows, leaving the pair little changed on the day at CNH7.1180 (note that the BBDXY has faded from best levels ahead of NY hours). A range of CNH7.0875-7.1302 has been seen thus far.

• Friday saw the strongest USD/CNY fixing (from a yuan standpoint) since late May, which provided a bid for the redback during early Asia-Pac hours.
• A reminder that the deviation between BBG survey expectations and the mid-point fixing itself has narrowed in recent weeks as the yuan stabilised (the PBoC deployed a particularly heavy fixing bias towards yuan strength in the September through November window).
• HK-China Stock Connect flows were essentially neutral for the yuan today, after two days of notable net inflows for mainland equities via those channels (see our daily China equities bullet for more on that matter, as well as ’23 equity market moves/flows and ’24 expectations).
• State TV reported that the annual Chinese NPC gathering will start on 5 March ’24.
• Technically, USD/CNH trend conditions remain bearish and the pair has pierced support at CNH7.0976, the Dec 15 low. A clearer break of this level/today’s lows would confirm a resumption of the downtrend and open CNH7.0670, the Jun 2 low, ahead of CNH7.0329, the 50.0% retracement of the Jan-Sep bull leg. Moving average studies are in a bear-mode position, highlighting a clear downtrend. Initial firm resistance is at CNH7.1636, the Dec 22 high.
• Looking ahead, the BBG survey suggests that USD/CNY will finish ’24 around CNY7.00, with narrowing interest rate differentials touted as the major supportive factor for the yuan.
• Official & Caixin PMI data headlines the Chinese docket over the coming days.