Chinese Yuan: PBoC resistance caps appreciation – Societe Generale
Societe Generale analysts Frank Benzimra, Michelle Lam and Kiyong Seong argue that the renminbi is nearing its peak as the PBoC pushes back against one-sided CNY strength. They expect USD/CNY to bottom at 6.60 in 1Q27, citing higher FX reserve requirements and potential fixing adjustments as key tools. Domestic liquidity and low inflation support slightly lower Chinese rates.
Chinese analysts foresee the renminbi reaching its highest point soon as the People's Bank of China (PBoC) resists one-sided appreciation. Citing higher foreign exchange reserve requirements and potential fixing adjustments, Societe Generale predicts the USD/CNY rate will bottom at 6.60 in the first quarter of 2027. The key policy response has been raising the foreign exchange reserve requirement ratio (FX RRR) from 4% to 6%.
A further increase to 8%, coupled with a higher USD/CNY fixing, would strongly signal resistance to additional CNY appreciation. The team has created the CNY Fixing Lean Index to monitor this policy signal. Domestic liquidity and subdued inflation in China provide room for Chinese interest rates to slowly decrease, though low starting yields limit opportunities for offshore investors.
In the broader market, AUD/USD remains stable above 0.7000 during the Asian session, consolidating gains from a recent three-week low. Bulls, however, remain cautious due to upcoming US employment data on Friday. USD/JPY shows a bearish trend as hawkish Bank of Japan (BoJ) minutes indicate continued rate hikes, and intervention concerns support the Japanese Yen.
Meanwhile, US midterm election results and hopes for Iran diplomacy continue to depress the US Dollar, while traders focus on Friday's NFP report. Gold has lost some momentum from its initial surge but remains near $4,100 per troy ounce as it benefits from a weak US Dollar and falling US Treasury yields after the US midterms.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
This story
This is one outlet's version. Read the fullest account.
