As an effort to ease Yuan’s weakening pressure, the PBoC set daily fixings that were stronger than market expectations in most trading sessions since Monday last week. The fixing is the mid-point of the trading band which allows CNY to move 2% in either direction. The PBoC also vowed to prevent large exchange rate fluctuations in its latest policy statement. 

The efforts seem to have some very short-term effects. However, we think they will unlikely reverse Yuan’s weakening trend until we see additional macro policy stimulus being rolled out and an improvement in economic fundamentals. 

USD/CNY will likely continue to stay above 7.20 and could test the 7.30 level in the near term.