USD/CNY to trade with neutral bias this week within 6.6500-6.7100 range - MUFG

Research Team at MUFG, suggests that it's now clear that China wants a weaker CNY against both the basket(s) and against USD.

Key Quotes

“Our PBOC fix forecast model, incorporating FX forward prices and assuming a constant depreciation rate for the CFETS RMB Index, also suggested USD/CNY above 6.7 by year-end. But voicing China's intention out publicly is another matter and will surely spook the officials (like Reuters' article last Thursday suggesting China may tolerate USD/CNY at 6.8), given their hard work to contain markets' RMB bearishness along the way.

Coupled with the second wave of #Brexit fear last week, USD/CNY rose towards the 6.7 level (USD/CNH did break 6.7), but faced strong resistance due to stage management; the National Team should stay around to guard this level for the week ahead. China's commitment re capital account liberalization remains questionable given the latest announcement to curb CNY/CNH arb trade. June FX reserves rose fastest since April 2015, while trade data will be top watch among next week's June data deluge.”