Frances Cheung, the head of macro strategy at Westpac, notes that USD/CNY and USD/CNH have continued to edge higher in the past week, after breaking resistance at 7.10.

• “With a couple of psychological levels out of the way, the flexibility for the RMB to move based on market forces and fundamentals has increased – where fundamentals argue for a higher USD/CNY and there is general upside pressure on Dollar/Asia.
• Risk is to the upside to our year-end forecast of 7.20. There were days when USD/CNY fixings were lower than expected, but efforts to smooth market movement do not contradict with a gradual upward grind in USD/CNY.
• Offshore-onshore forward point spreads narrowed somewhat, but there is room for a re-widening given an easing bias onshore and a limited liquidity pool offshore.”