Yuan Stronger Despite Geopolitical Tensions

PBOC fixed USD/CNY at 6.5376, 8 pips below sell side estimates. Offshore yuan is stronger but has come off best levels, the weaker greenback creating space for yuan to expand in to. USD/CNH last down 19 pips at 6.5463, off session lows of 6.5380. The rate is now within touching distance of its 2021 highs at 6.5626. The rate has been in a range from 6.40-6.60 since late November 2020.

• It was reported earlier China is placing sanctions on UK individuals and entities over comments of treatment of Uighur muslims in Xinjiang province, which could raise international geopolitical tensions.
• The PBOC delivered a statement after its quarterly scheduled meeting yesterday, the banks said it would maintain appropriate and flexible policy as well as reasonable and adequate liquidity.
• Elsewhere, the World Bank upgraded China's growth forecast. China is expected to lead the recovery of East Asian and Pacific economies this year, growth is expected at 8.1% in 2021, compared with 2.3% in 2020. The PBOC have issued a research note which sees 2021-2025 potential growth at 5%-5.7%, the NPC set the growth target at over 6%.
• The Chinese yuan may not maintain last year's momentum through the early part of this year, and is unlikely to trade past 6 against the U.S. dollar in 2021, Guan Tao, chief economist of BOC International and a former official at the State Administration of Foreign Exchange, said in a forum on Wallstreetcn.com on Thursday.