Renminbi remains under pressure

China's central bank set the USD-CNY fixing rate at 6.3607, 63pips lower than the previous fixing. The 0.1% appreciation of the CNY fixing rate was the biggest gain in two weeks, following the strength of non-USD currencies overnight. 

USD-CNH breached below the key level of 6.40 this morning, but the CNY-CNH spread still remains wide at around 350-400pips. However, the pressure on CNY has not yet relieved. 

"Chinese corporates and individuals bought net USD128.1bn from the commercial banks in August, a record high, compared with a net purchase of USD28.5bn in the prior month. This clearly suggests that CNY is under pressure to depreciate", says Commerzbank. 

In the meantime, Chinese authorities said that there are few signals that China is experiencing strong capital outflows, as the USD deposits in the banking system is also picking up, indicating that the money is not leaking from the economy. However, data compiled by PBoC shows that the foreign currency deposits only increased by USD30bn in August.