USDCNY: Weakness extended - Commerzbank

Hao Zhou, Analyst at Commerzbank, notes that following the PBoC’s stronger-than-expected fixing, both USD-CNY and USD-CNH fell significantly, which has been extended.

Key Quotes

“USD-CNH breached below 6.60 with little resistance, immediately after the PBoC’s fixing, although today’s fixing rate is seen as “neutral” by most market participants. It appears to me that the market deeply believes that it does not make sense to take a short CNY or CNH position as the Party Congress, the most important political event in China, will kick off next week. As such, there are few USD bids in the market, and USD-CNY and USD-CNH are falling like a stone.”

“Only the PBoC could stop the appreciation of the CNY at this moment. Relatedly, China’s FX reserves rose for the 8th consecutive month, above USD3.1trn as of September, thanks to capital control measures.”