USD/CNY: China is defending 6.70– RBC CM

Sue Trinh, Senior Currency Strategist at RBC Capital Markets, notes that the CNY fix was higher than expected at 6.6946, against consensus expectations of a 6.70 handle, putting a lid on USD/CNH and USD/CNY.

Key Quotes                               

“There is a lot of talk that China is defending 6.70. This coincides with the G20 meeting of finance ministers and central bankers in Chengdu this Saturday and the unprecedented “6+1” roundtable talks with heads of major international finance and trade organisations in Beijing on Friday and speculation that China could be “window dressing” to stem CNY weakness, avoiding criticism of its exchange rate policy. This is plausible and fits with China’s modus operandi, but the movement recovery in the CNY vs. the basket since last week has been consistent with the broad move in the DXY. In any case, any defense of 6.70, real or perceived, for “window dressing” purposes will be temporary, as it always is.”