Two factors have driven the renminbi stronger today. The first is the People's Bank of China (PBoC) delivering a much lower USD/CNY fix than expected. Additionally, the PBoC drained liquidity when it did not need to, which could be read as a further attempt to squeeze out those holding short Renminbi positions.

It is unclear how much lower Chinese authorities would like USD/CNY to be and local authorities cannot necessarily rely on a broadly soft Dollar environment for long. But for the short term, we think these moves can lift the Asian FX bloc in general and add to the current soft Dollar environment.