PBoC’s intervention reflects expectation of a weaker Chinese Yuan

PBoC set USD-CNY fixing rate at 6.3966 this morning, compared with previous clos-ing of 6.3949. In the meantime, China's central bank injected RMB120bn cash into the market via 7-day reverse repo, compared with today's maturing funds of RMB50bn. 

The increased size of reverse repo could signal that the central bank intends to prevent a spike of the onshore interest rates, as PBoC should have sold its foreign reserves to stabilize CNY exchange rate, the inter-bank CNY liquidity tightens somewhat as a result. 

"The intervention in the FX market from the central bank also reflects the market expectation that CNY exchange rate will likely weaken further", says Commerzbank.