USD/CNY drops due to PBoC’s intervention

USD/CNH dropped by almost 1% overnight due to PBoC's aggressive intervention. This is somewhat inconsistent with the market trend yesterday as dollar strengthened against most of the majors following Fed's hawkish statement. That said, it is very clear that the Chinese authorities don't want to see a big spread between CNY and CNH, especially before the SDR discussion in late November. 

One PBoC official said yesterday that the central bank would use its foreign reserves effectively to manage market expectations and safeguard its financial system, indicating that China's market intervention will not stop any time soon. This morning, USD/CNH has already traded lower than USD-CNY, the first time since early October, due to short recovering flows triggered by PBoC's intervention. 

"Over the short term, we see that USD/CNH should be supportive at 6.32-6.33 level, as the PBoC almost stopped intervention when USD/CNY fell to this level in early October", foresees Commerzbank.