USD/CNH: PBoC may continue to restraint the RMB - OCBC

USD/CNH eased as policymakers continued to keep the daily fix under 7.20. In fact, the CNY fix was even set stronger at 7.1934 than the day before (at 7.1996). Pair was last at 7.2838, OCBC's FX analysts Frances Cheung and Christopher Wong note.

CNH may still trade under pressure

"Fixing pattern suggests that PBoC is doing whatever it takes to restraint the RMB from over-weakening after the initial round of knee-jerk depreciation post-US election outcome. That said, tariff headlines served as a constant reminder that wider tariffs could soon hit when Trump comes on board officially in Jan2025. PBoC may continue to restraint the RMB from excessive weakening via daily fix, but likely they may have to deploy offshore funding squeeze (if need arises) to ensure more effective transmission."

"CNH may still trade under pressure expectations for further rate cuts at home while economic recovery remains uneven. Caixin services PMI was weaker than expected while manufacturing PMI was stronger than expected. Housing market has also showed very mixed signs of stabilisation. While there may be other stimulus support measures to support the domestic economy, these are at best mitigating factors only."

"Meantime the bias for RMB may be skewed towards further weakening (notwithstanding some short-term technical correction). Daily momentum is mild bullish while RSI shows signs of turning from near-overbought conditions. Corrective pullback not ruled out. Support at 7.2745 and 7.2440 (21 DMA). Resistance at 7.32, 7.3450 levels."