Chinese Yuan: Trade risks limit gains against US Dollar – OCBC

OCBC’s Sim Moh Siong and Christopher Wong note that reports of potential US tariffs on Chinese goods and the PBoC’s resistance to rapid Renminbi (RMB) gains are likely to limit further downside in USD/CNH. While the broader RMB appreciation bias remains intact, the pair trades near recent lows and mild bearish momentum is showing tentative signs of turning higher.

RMB gains face tariff uncertainty

"Reports that the US is considering a 7.5% tariff on Chinese goods may add some uncertainty ahead of next month’s Trump–Xi meeting."

"For now, the RMB reaction has been limited so far, with USD/CNH still trading close to recent lows, suggesting markets do not see this as a major escalation risk at this stage."

"Separately, the PBoC was already leaning against the pace of RMB gains, with Monday’s fixing around 600 pips above market expectations."

"With the USD also firmer overnight, further gains for RMB may be more limited even if the broader RMB appreciation bias remains intact."

"Mild bearish momentum on daily chart intact though RSI is showing tentative signs of turning higher from oversold conditions. Modest rebound not ruled out. Resistance at 6.74, 6.7460 (21 DMA). Support at 6.72, 6.70 levels."