Today's USD/CNY fixing was the highest since Nov last year and the largest daily gain since the first few sessions of 2024. The chart below plots the USD/CNY fixing trend versus the BBDXY USD index trend.

• Today's fixing was expected to go higher given market estimates, although given the market's reaction it was clearly somewhat of a surprise. USD/CNH rebounded back to 7.1750 post the outcome erasing earlier losses and is firming above 7.1800 in recent dealings.
• The chart below shows the higher USD/CNY fixing levels is a little at odds with lower USD index levels, which peaked in late June of this year. Having said that the fixing level should have been arguably higher through the Q2 stronger USD period.
• Today's result for the fixing likely suggests the authorities don't want to see the yuan appreciate too much in light of recent volatility/gains.
• Markets may also be mindful of broader USD trends with a potential Fed shift approaching. A weaker CNY trade weighted FX basket (i.e. CNH underperformance on FX crosses) may also be consistent with the China authorities objectives against a still challenging local backdrop and a bias by the PBoC to ease.
• In terms of levels, for USD/CNH, upside focus will be on 7.2032, the July 25th low. Recent lows have a 7.0800 handle, although our sense is that moves sub the fixing level today (7.1460) may draw some buying interest in the near term.

Fig 1: USD/CNY Fixing Versus USD BBDXY Index Trend

Source: MNI - Market News/Bloomberg