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USD/CNH continues to move lower
This is inadvertently also driving further dollar weakness across the board as EUR/USD moves towards the 1.1600 handle now. The PBOC’s decision to re-introduce the counter-cyclical factor in its yuan fixing mechanism is definitely a yuan positive and will provide added support for the local currency.
As mentioned earlier, even if the impact of the re-introduction is minimal, the psychological effect of such a move will cause traders to react in kind and that is what we’re seeing currently.
Of note in trading this week also, the onshore Chinese yuan posted its first weekly gain against the dollar in eleven weeks. Add the above into the equation and it could signal that the yuan may be poised for making a turnaround – or at least we have met the highs for the time being.