The last two fixings (30 August and 31 August) by the PBOC were interesting, in the sense that they have kept the USD/CNY rate below 6.90 and pushed back against market expectations for a stronger fix. In particular, the one yesterday was quite some ways off estimates – which normally isn’t so much so the case.
It could be a sign that either markets have gotten a bit presumptuous on what the Chinese central bank might do or that policymakers are starting to draw the line and put up the speed bump on the latest yuan drop.
When it comes to the yuan, it is best to listen to what Chinese authorities have to say. They drew a hard line previously at 6.80 for USD/CNY in the yuan’s fall during April to May and so it will be best to look at where they might reposition that line now.
I reckon that they might ease it towards 7.00 but that might also depend on dollar sentiment in general. The US jobs report this week will be a key driver in that sense. In any case, if China is starting to pump the brakes then this tailwind for the dollar might start to deplete in the week(s) ahead.