CNY: PBOC Fixing Slows Decline Pace – OCBC

USD/CNH is now at 6.70907, after rebounding from its lowest level since February 2023. According to OCBC's Christopher Wong, the direct trigger for the rebound was the PBOC setting the fixing higher than market expectations, signaling an intention to slow the pace of CNY appreciation.

**Fixing Signals Cooling Intent**

The PBOC set the fixing at 6.7852 per dollar, 633 pips weaker than market estimates. CNY has appreciated about 4% this year, and analysts believe the move is intended to slow the pace of appreciation rather than reverse the overall trend. OCBC noted that guiding CNY via the fixing is consistent with the goal of CNY internationalization.

**Appreciation Logic Unbroken**

OCBC analysis suggests that the pattern of stronger fixings is a continuation of the PBOC's "moderate" appreciation pace since April. This implies the current fixing adjustment is more about managing the pace than changing direction. The rebound in offshore CNY after a brief dip also reflects the market's rational digestion of policy signals.

**Near-Term Focus on Fixing Guidance**

Market participants believe the subsequent strength of fixing settings remains the key indicator for gauging policy intent. If the fixing continues to come in stronger than expected, the pace of CNY appreciation may slow further; if it reverts to a weaker bias, the appreciation trend could resume. The current offshore rate of 6.70907 remains near multi-year lows, and volatility risks warrant attention.