CNY Strength Supported by Bullish Official Guidance
(1 September 2022 – China) The Chinese Yuan (CNY) bounced and trended higher this week, surpassing the key barrier of 6.9 per dollar as surprisingly strong official guidance rate discouraged market participants from selling local currency lower.
Analysts projected that the firmer-than-expected midpoint fixings over the past week could be part of an official attempt to rein in recent rapid Yuan losses. East & Partners newly released Asia Business FX analysis reveals CNY represents a rising proportion of forecast FX turnover for Hong Kong importers and exporters in the next six months in line with the USD as Euro volumes weaken sharply as an ongoing rotation away from FX Options to Forward FX for risk management continues to take place.
"It indicates China's central bank strives to keep the Yuan exchange rate basically stable and curb one-way speculation on the Yuan depreciation ahead of the ruling party's 20th national congress that will kick off on October 16" commented Scotiabank Asia FX strategist, Qi Gao.
"Investors will also watch out for any further policy actions to smooth the RMB move if the fixings and verbal intervention fail to do so" said OCBC Rates Strategist, Frances Cheung.
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