Chinese Yuan: Authorities seen moderating appreciation pace – OCBC

OCBC strategists Sim Moh Siong and Christopher Wong anticipate USD/CNH appreciation to stabilize as Chinese authorities moderate the pace of Renminbi (RMB) gains. The recent 2 percentage point hike in the FX deposit reserve requirement ratio to 6% has slowed near-term RMB appreciation, although OCBC still maintains a measured bias towards RMB gains.

Daily fixings are crucial for assessing policy restraint and the analysts highlight nearby resistance and support levels for USD/CNH. USD/CNH reached a high of 6.6860 intraday before easing. The sharp rise in USD/CNH followed the People's Bank of China's (PBoC) announcement on Tuesday to raise the FX deposit reserve requirement ratio by 2 percentage points to 6%.

The policy move aimed to temper near-term RMB appreciation momentum, though further upside remains possible as markets reassess the authorities' tolerance for currency strength. OCBC views the latest measure as an attempt to manage the pace of RMB gains rather than alter the overall direction. While near-term RMB consolidation or further pullback cannot be ruled out, the bank's measured appreciation bias remains intact, especially if broader USD weakness becomes more sustained.

The daily momentum turned mildly bullish, and recent RSI rise moderated. Some consolidation is expected unless fixing surprises occur. Resistance levels identified are 6.6760 (21-day moving average), 6.6840 (50% Fibonacci retracement of September high to November low), and 6.6940/60 (61.8% Fibonacci, 50-day moving average). Support is at 6.6620 (23.6% Fibonacci).