The Chinese Yuan is under renewed selling pressure again today. USD/CNH (offshore Yuan) rises to as high as 6.921 so far and breaks 6.912 resistance. The development is apparently dragging down Chinese stocks, with Shanghai SSE down -1.32% at the time of writing. Asian indices are all affected, with Nikkei down -0.38%, HK HSI down -1.52% and Singapore Strait Times down -0.21%. Australian Dollar also suggests deep selling, partly due to such development.
USD/CNH has been in steep rise since hitting a low at 6.2359, as trade tension between the US and China escalated. The next batches of tariffs will start next week and more are coming. The Chinese National Development and Reform Commission pledged today to work on meeting this year’s 6.5% growth target. With usual way of interpreting Chinese rhetorics, it means they found it difficult to meet that target.
Now USD/CNH is on course to have a test on key resistance level at 6.9871, 2017 high. It remains to be seen if the government will intervene more aggressively. If the Yuan is solely moved by market forces, we see no reason why USD/CNH will not break 7 handle.