Yuan Surges As Mainland China Returns To Work

USD/CNY plunged to its worst levels since Apr 2019, tracking recent appreciation in offshore yuan, and the PBoC showed little appetite for arresting the rate's losses, as it set the central USD/CNY mid-point at CNY6.7796, below BBG est. of CNY6.7854. The stronger than expected PBoC fix applied pressure to USD/CNH, sending it under the Oct 5 cycle low flagged earlier. With USD/CNH last trading -256 pips at CNH6.7126, bears look for further losses past the psychological CNH6.70 barrier, towards the aforementioned CNH6.68-67 zone, which limited losses as the pair charted a triple bottom in 2019. Looking further to the downside, focus falls on the CNH6.5 level, flagged by an official speaking to the Global Times as a boundary beyond which pressure to exporters would become "perceivable".

• USD/CNH ignored the release of Caixin Services, which suggested a slightly above-forecast acceleration in the sector's expansion. The rate continued to test the CNH6.71 figure around the time of the release.