Further losses in USD/CNH should not be ruled out for the time being, note Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: “Yesterday, we indicated that USD ‘is likely to drift lower but is unlikely to challenge the support at 6.8700’. Our view turned out to be correct as USD dipped to a low of 6.8714 before rebounding. The underlying tone still appears to be soft, but while USD could dip below 6.8700 today, the next support at 6.8560 is unlikely to come into view. On the upside, a breach of 6.9000 (minor resistance is at 6.8900) would indicate that the current mild downward pressure has eased.”

Next 1-3 weeks: “There is not much to add to our update from yesterday (05 Jan, spot at 6.8910). As highlighted, while the decline in USD from last month has slowed, the risk is still on the downside. Only a break of 6.9250 (‘strong resistance’ level was at 6.9400 yesterday) would indicate that the downward pressure has eased. That said, any decline is expected to face solid support at 6.8400.”