Chinese Yuan: RMB gains hinge on PBoC fix – OCBC

OCBC strategists Sim Moh Siong and Christopher Wong have observed that the Chinese Yuan (RMB) has seen recent gains, with the USD/CNY exchange rate breaking below 6.70. The People's Bank of China (PBoC) has strengthened the fixing for nine consecutive sessions ahead of the Trump-Xi meeting. They believe that the RMB could remain supported if the strong fixes continue, but warn that wide US-China yield differentials and domestic fundamentals may cap the pace of appreciation beyond the event.

The firm fixing bias is notable given the broader USD/rates backdrop, reinforcing the recent shift in fixing guidance towards a somewhat firmer RMB. This coincides with the imminent Trump-Xi meeting, where there is room for RMB to stay supported. Near term, the fix remains crucial to monitor. If the PBoC maintains the recent pace of stronger fixes, RMB momentum can continue; however, a slowdown or pause could disappoint expectations and diminish the move.

After the meeting, wide US-China yield differentials and soft domestic fundamentals will likely limit the RMB's appreciation. Current daily momentum shows tentative signs of turning mildly bearish, while the RSI fell, suggesting some downside pressure may emerge but remains within an orderly range. Immediate support is around 6.69 levels, with next support potentially at 6.67 levels. Resistance levels include 6.7030 and 6.7110 (21-day moving average).