On Monday, Premier Li Keqiang told IMF Managing Director Christine Lagarde that China does not intend to stimulate exports by devaluating the yuan and will continue to keep the exchange rate “basically stable at an adaptable and equilibrium level”.

“We expect dollar/yuan spot to continue to trade in tandem with USD/ CNY fixing in both onshore and offshore markets for now as risk-appetite post March FOMC meeting further alleviates depreciating pressure on the yuan temporarily”, says Scotiabank.

Meanwhile, the People’s Bank of China is likely to keep yuan relatively stable against a basket of currencies while enduring more volatile or flexible USD/CNY fixing. Furthermore, as foreign ownership of yuan-denominated financial assets of the mainland is still not significant, a stable yuan or yuan basket along with more opening-up of the country’s financial markets will increase foreign investors’ interest in the country’s yuan financial assets.

JPMorgan had announced on 15 March that it has placed the country’s onshore government bond market on review to include in its GBI-EM Global Diversified Index, which is tracked by USD 180 billion in assets. Onshore govvies of China, if accepted, might have a maximum weight of 10%. Moreover, MSCI had stated on 5 February that it will “again actively seek feedback from the international investment community” beginning in early April before making a final decision regarding A-share inclusion in June 2016.

Yesterday, China Securities Finance Corp. (CSF) began lending again to securities companies to support margin trading business of brokerages. It aims at rebounding the country’s equity market confidence by urging investors to purchase stocks using borrowed money. This shows that the regulators are fine with current leverage levels in the equity market.

The yuan gets relief for a brief period of time from the dovish FOMC. In the coming weeks, the yuan might appreciate against the US dollar along with regional peers amid risk-appetite as China’s regulators are committed to keep the yuan basket stable. Meanwhile, focus is to be given to early signs of a turnaround in the risk-taking sentiment such as the US PCE core inflation and wage growth, and also the UST 5Y5Y forward breakeven.

Overnight, San Francisco Fed chief John Williams and Atlanta Fed chief Dennis Lockhart stated the likelihood of raising rates during April FOMC meeting, although both are non-voters this year. This might hint at a fine-tuning stance of the Fed. Furthermore, UST breakeven and US economic surprise index have risen further.

According to the WSJ report, the IMF is pressing China to disclose further information regarding its currency operations, as the central bank, in order to help prop up the yuan, has turned to the derivatives market. The PBoC’s holdings of derivatives might help decelerate the drawdown of its FX reserves. Resumed concerns regarding the Fed’s interest rate normalization might dampen market sentiment.

“We still expect USD/CNY to reach 6.70 at the end of 2016”, says Scotiabank.