Aug 25, 2023

The Jackson Hole economic symposium could stimulate the USD/CNH exchange rate.


USD/CNH: Weekly chart

The USD/CNH exchange rate is currently trading at the 7.30 level, a key level after the 2022 high. Failure to break above this level could trigger a recovery of the renminbi.

Chinese stocks rose sharply on Tuesday night in what traders called a technical gain.

There has been speculation that the purchase of state-backed funds is one of the reasons for this bullish change. The CSI 300 has fallen in the past two weeks after the situation led to the so-called “national team” buying to cushion losses. Some other traders referred to a Caixin report on Saturday that China was considering stronger action to address the risks posed by local government financing vehicles.

“Most of the people I spoke to were very confused by this afternoon’s move. There have been all sorts of speculations, but there has been no clear explanation,” said Willer Chen, senior analyst at Forsyth Barr Asia. But he added that given the recent sharp decline, “some technical rally is also reasonable.”

Foreign investors continued a net sell-off of Chinese stocks on Tuesday, divesting 6.4 billion yuan ($875 million) from the market. This extends the sell-off record to 12 days. According to Bloomberg, the turnover of Chinese concept stocks was about 800 billion yuan, unchanged from the average for the month.

Investors can follow Fed Chairman Jerome Powell’s comments after Friday’s Jackson Hole meeting, while China’s stimulus measures could exacerbate the yuan’s strength.

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