The USD/CNH exchange rate is approaching a critical level, with 7.28-7.30 seen as the next line in the sand, according to OCBC. However, what the People’s Bank of China (PBoC) is likely focusing on is the speed and volatility of the depreciation, rather than a specific level. The market is also eagerly awaiting fiscal stimulus measures to support domestic demand.
Experts at OCBC have identified 7.28-7.30 as a crucial threshold for the USD/CNH exchange rate. This range represents a significant level of support and could potentially act as a turning point for the currency pair. However, the PBoC’s main concern seems to be the pace of the depreciation and excessive volatility, rather than the specific level the exchange rate reaches.
The PBoC is believed to be targeting herd behavior and one-sided movements in the market. By addressing these factors, the central bank aims to stabilize the currency and prevent any sharp or sudden depreciation. This approach suggests that the PBoC is more concerned about maintaining stability in the currency market than achieving a particular exchange rate target.
Meanwhile, market participants are eagerly looking for fiscal stimulus measures that can support domestic demand. With the Chinese economy facing headwinds, policymakers are expected to introduce measures to boost economic growth. These measures could include tax cuts, increased government spending, and other initiatives aimed at stimulating consumer spending and business investment.
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In conclusion, the USD/CNH exchange rate approaching the range of 7.28-7.30 is seen as a significant milestone. However, the PBoC’s main focus is on stabilizing the currency market by addressing excessive volatility and herd behavior. Market participants are eagerly awaiting fiscal stimulus measures to support domestic demand and boost economic growth. Investors should conduct their own research and analysis before making any investment decisions, as investing in open markets carries inherent risks.
