The daily fix for Chinese Yuan has come in at 6.5960 versus the previous level at 6.5569, a near 400 point cut!
The selloff has accelerated, with a steeper trendline on the USDCNH pair:
Where will it end? What’s the uncle point for the Chinese authorites? Somewhere around 6.70 but it could overshoot to the 6.90 level easily if the trade war widens:
According to Zhang Ming, a senior fellow at the Chinese Academy of Social Sciences (CASS) 6.7 is the level that could spur some action from the PBoC, either by suspending devaluing operations, or by taking direct actions to dampen volatility.
It’s also a possibility for the PBoC to use their ample FX reserves, or to reintroduce a counter-cyclical factor into the way uses its fixing formation mechanism to actively support the Yuan.