China’s latest rate cut did little to dent the CNY’s recovery, DBS’ FX strategist Philip Wee notes.

USD/CNY pays more attention to Fed than PBOC

“Monday’s 10 bps reduction in the 14-day reverse repo rate to 1.85% paled compared to last Wednesday’s 50 bps decline in the Fed Fund Rate to 4.75-5.00%. The People’s Bank of China was ensuring ample liquidity ahead of the National Day holidays starting October 1. Conversely, the Fed’s easing sought to avert a further cooling in the US labour market.”

“USD/CNY peaked at 7.2775 on July 24 before declining to the year’s low of 7.0428 last Friday. Despite yesterday’s 0.1% rise to 7.0521, USD/CNY held below last year’s closing level of 7.10, confident that US recession fears have now overshadowed China’s slowdown worries.”