PBOC is expected to set the USD/CNY reference rate at 6.8138 – Reuters estimate

What the desk is arguing

The desk believes the PBOC's expected fixing at 6.8138 signals a proactive stance against depreciation pressures on the yuan. This rate will be crucial for market participants interpreting the PBOC's broader economic strategy, especially in light of recent fluctuations in global markets.

The PBOC's decision-making process incorporates multiple factors, including previous closing prices and broader economic conditions. A stronger-than-expected fixing could indicate the central bank's intent to support the yuan, particularly against a backdrop of potential dollar strength and domestic economic challenges.

Where it sits in our coverage

Our consensus target for USD/CNY stands at 1.075, with a range of 1.04 to 1.12. Notable firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)

This view aligns with jpmorgan, which expects a stronger yuan, while bofa presents a more bearish outlook, indicating a divergence in expectations around the PBOC's intervention strategies.

How other firms see it

Firms like jpmorgan and citi are aligned with our view, anticipating a stable or stronger yuan in the near term. Conversely, bofa and deutsche express caution, suggesting potential weakness in the yuan due to external pressures.

Traders should also monitor the EUR/USD trajectory, as shifts in the eurozone's economic outlook may influence the broader USD/CNY dynamics. Additionally, the upcoming Fed meeting could impact dollar strength, further affecting the yuan's performance.

What the calendar says

...