OCBC strategists Sim Moh Siong and Christopher Wong note recent RMB strength as USD/CNY fell sharply after holidays, tracking a heavy USD/CNH. The move reflects a softer Dollar, better risk sentiment and perceived policy tolerance for RMB appreciation. They focus on upcoming daily fixes to gauge whether authorities allow faster gains or signal moderation, with technicals showing downside bias but risk of a snapback.

RMB strength tests key support levels

"CNY’s post-holiday strength reflects softer USD conditions, better risk sentiment, and policymakers’ tolerance for appreciation. The daily fix ahead will reveal whether authorities endorse faster gains or prefer to slow the pace."

"USDCNY fell sharply overnight after returning from spring break holidays. The move in USDCNY tracked USDCNH, which has continued to trade with a heavy bias. RMB’s outperformance was not due to a single catalyst but likely a range of factors including less strong USD environment, supported risk sentiment and the perception that policymakers allow for RMB strength (given little pushback)."

"Hence, we would pay close attention to the fix today and coming sessions to assess if policymakers do allow for faster but measured pace of RMB appreciation or if policymakers are signalling for moderation in pace of RMB appreciation."

"Bias skewed to the downside though the risk of snapback is not ruled out. Support at 6.8465 – 6.85 levels. Break below said support puts next support at 6.82 levels."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)