USD/CNY: Volatility interpreted as more to the downside - Westpac

USD/CNY was fixed lower in the past days, after PBoC Governor Zhou’s comments on FX reform, among other topics, points out Frances Cheung, Research Analyst at Westpac.

Key Quotes

“Stance on further FX reform should lead to more two-way fluctuations in the RMB. These comments came at a time with various indicators pointing to reduced outflow pressure, continued tightening measures on ODI, expectation for support ahead of the NPC and a pause in USD strength – hence the two-way volatility might have been interpreted as more to the downside for USD/CNY for now.”

“That said, we expect less aggressive USD/CNY fixing from now heading into the NPC, if stability remains the prominent short-term policy aim, despite medium-term vision for higher volatility. We expect range-trading in spot CNY in the coming days.”