CNH: USD/CNY Fixing Error Again Positive, USD/CNH Edges Up Back Closer To 7.0800

The USD/CNY fixing error was again positive at +18pips (fixing printed at 7.0789, versus 7.0771 projected). USD/CNH is slightly higher compared to earlier levels (lows were at 7.0738), no back near 7.0780. Overnight highs were at 7.0818. The positive fixing error is likely to curb downside USD/CNH momentum in the near term, but upticks are still likely to sold, with recent lows in the pair in the 7.0900/7.1000 now a potential resistance point. Broader macro drivers, like easier Fed policy settings, coupled with still elevated holding of foreign currency, still point to on-going downside risks in the pair. 

• Our policy team noted late yesterday: "The yuan could breach 7.0 against the greenback as early as February next year, around the Spring Festival, marking its first break of the level since September 2022, a forex analyst said, noting that rising cash demand ahead of the holiday typically prompts companies to step up foreign-exchange settlements."