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The USD/CNH Exchange Rate Fluctuates Around 6.9000 As Focus Shifts To PBoC Policy

Daniel Rogers

Mar 17, 2023 13:53

Throughout the Asian session, the USD/CNH has maintained a range near 6.9000. Before taking action on the main, investors are awaiting the People's Bank of China's (PBOC) interest rate decision on Monday.


After a strong recovery on Thursday, S&P500 futures are exhibiting minimal losses in the Asian session, indicating a rise in market participants' risk appetite. The US Dollar Index (DXY) has escaped the tight consolidation between 104.30 and 104.60. Investors' skepticism regarding the Federal Reserve's (Fed) prospective monetary policy has diminished the appeal of the USD Index in the wake of a decline in U.S. inflation and escalating banking turmoil.


Following an optimistic recovery in 500-US stock basket futures, lethargic demand for US government bonds has increased the returns on the same. The yields on 10-year Treasury notes have surpassed 3.59 percent.


In the future, emphasis will be placed on the release of the PBoC's monetary policy decision. Economists from the UOB Group speculate that the PBoC may reduce the Loan Prime Rate (LPR) at its March 20 meeting. The 1Y loan prime rate (LPR) could fall to 3.55 percent and the 5Y loan prime rate (LPR) could fall to 4.20 percent after the National People's Congress (NPC). This is due to the need for additional measures to support the actual economy and the wish to increase housing demand.


In addition, an upward revision of China's projected Gross Domestic Product (GDP) would strengthen the Chinese Yuan. Goldman Sachs has increased its GDP forecast for China for 2023 from 5.5% to 6%.