Brown Brothers Harriman’s (BBH) Elias Haddad notes the Dollar is mixed within a multi‑month range while USD/CNH continues to grind lower, reaching its weakest level since March 2023. The bank sees further downside potential as a stronger Yuan supports China’s shift toward consumption-led growth. The PBOC is allowing appreciation but tempering expectations via a stronger-than-forecast USD/CNY fixing.

Yuan gains as PBOC steers fix

"USD is mixed, trading within its multi-month range, but USD/CNH keeps grinding lower. USD/CNH dropped to its lowest level since March 2023, and we see more downside potential."

"A continued appreciation of the yuan can help China shift its growth model towards consumer spending by boosting disposable income through cheaper imports."

"The People’s Bank of China (PBOC) is not resisting yuan strength but instead managing the currency’s appreciation expectations with a higher-than-forecast USD/CNY fix."

"USD/CNY fixing was set at 6.9228 vs. Bloomberg survey estimate of 6.8618."

"The gap between the fixing and forecast was the most positive on record."

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