Yuan Rangebound As PBOC Fails To Provide Market Impetus

The PBOC were closely watched as they set the yuan reference rate today, in the wake of a sizeable weak bias manifested in Thursday's fixing. The central USD/CNY mid-point was set at CNY6.3677, just 15 pips above average estimate (as per Bloomberg survey), a moderation from yesterday's 60-pip deviation. The yuan has been unimpressed by the fixing and held a tight range.

• Worth noting that there was speculation that the People's Bank could ease policy as soon as today by marginally trimming the interest rate applied to their MLF operations. This did not come to fruition, but there is broad consensus that China's central bank are looking to ease policy at some point going forward.
• Elsewhere, the December trade report revealed a solid beat in headline trade surplus, which soared to $94.46bn, comfortably the widest monthly surplus on record. Over the whole 2021, both imports and exports reached record levels, generating an annual trade surplus of $676bn.
• Spot USD/CNH trades at CNH6.3635 when this is being typed, down 10 pips on the day. Bears need a fall through yesterday's low of CNH6.3573 before taking aim at CNH6.3379, which limited losses on Dec 31. Bulls keep an eye on Jan 6/Nov 26 highs of CNH6.3976/99.
• The next week will get off to a busy start on Monday, with the release of quarterly GDP and monthly economic activity indicators. Later, on Thursday, the PBOC will announce their LPR fixing. There is a small number of dissenting analysts calling for a cut as soon as next week.