- USD/CNH maintains its position amid the stable US Dollar and hawkish Fed.
- Trump administration plans to impose a 10% tariff on Chinese imports effective February 1.
- Chinese authorities permit 100 billion Yuan of pension funds to boost investments in domestic equities.
USD/CNH, representing the offshore Chinese Yuan (CNH), extends its gains for the third successive day on Thursday. The pair appreciates as the US Dollar (USD) receives support as traders expect the US Federal Reserve (Fed) to keep its benchmark overnight rate steady in the 4.25%-4.50% range at its January meeting. Moreover, Trump’s policies could drive inflationary pressures, potentially limiting the Fed to just one more rate cut.
US President Donald Trump stated that his administration is considering imposing a 10% tariff on Chinese imports starting February 1. However, the proposed tariff is significantly lower than the previously threatened 60% rate, it aligns with the pledge Trump made during his presidential campaign.
However, Chinese authorities on Thursday introduced several measures to stabilize its stock markets, including allowing pension funds to increase investments in domestic equities. A pilot scheme enabling insurers to purchase equities will be launched in the first half of 2025, with an initial scale of at least 100 billion Yuan. Meanwhile, the People’s Bank of China (PBoC) said that they “will expand the scope and increase the scale of liquidity tools to fund share purchases at the proper time.”
Technical Analysis: USD/CNH could find initial resistance at a nine-day EMA near 7.3100
The USD/CNH pair trades near 7.2820 during Asian hours on Thursday. A review of the daily chart shows the pair remaining below nine- and 14-day Exponential Moving Averages (EMAs), signaling a weaker short-term price momentum.
Additionally, the 14-day Relative Strength Index (RSI), a key momentum indicator, remains below the 50 mark, confirming a persistent bearish momentum.
On the downside, the USD/CNH pair may retest its six-week low at 7.2522, which was recorded on January 21. Further support appears around the psychological support level at 7.2000 level.
The USD/CNH pair may find initial resistance around the nine-day EMA at the 7.3048 level, followed by the 14-day EMA at the 7.3127 level.
USD/CNH: Daily Chart
PBOC FAQs
The primary monetary policy objectives of the People's Bank of China (PBoC) are to safeguard price stability, including exchange rate stability, and promote economic growth. China’s central bank also aims to implement financial reforms, such as opening and developing the financial market.
The PBoC is owned by the state of the People's Republic of China (PRC), so it is not considered an autonomous institution. The Chinese Communist Party (CCP) Committee Secretary, nominated by the Chairman of the State Council, has a key influence on the PBoC’s management and direction, not the governor. However, Mr. Pan Gongsheng currently holds both of these posts.
Unlike the Western economies, the PBoC uses a broader set of monetary policy instruments to achieve its objectives. The primary tools include a seven-day Reverse Repo Rate (RRR), Medium-term Lending Facility (MLF), foreign exchange interventions and Reserve Requirement Ratio (RRR). However, The Loan Prime Rate (LPR) is China’s benchmark interest rate. Changes to the LPR directly influence the rates that need to be paid in the market for loans and mortgages and the interest paid on savings. By changing the LPR, China’s central bank can also influence the exchange rates of the Chinese Renminbi.
Yes, China has 19 private banks – a small fraction of the financial system. The largest private banks are digital lenders WeBank and MYbank, which are backed by tech giants Tencent and Ant Group, per The Straits Times. In 2014, China allowed domestic lenders fully capitalized by private funds to operate in the state-dominated financial sector.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Trading Pro
Account
7.2
8.2
7.2
Tools
5.2
Service
6.6
Trading
8.0
Trust
5.0
Experience
7.0
Recommended content
Recommended content
Editors’ Picks
EUR/USD remains below 1.1000 on Powell's remarks
The US Dollar's recovery has gained momentum, pushing EUR/USD down to sub-1.1000 levels—the daily lows—following Fed Chair Jerome Powell's "Economic Outlook" speech.
GBP/USD loses the grip and approaches 1.2900
GBP/USD is shedding some of its weekly gains and retreating back to around the 1.2900 level, as the Greenback continues its recovery following Chair Powell's comments.
Gold remains offered, looks at $3,000
Gold prices are deepening their daily retreat, edging closer to the crucial $3,000 per troy ounce level as the US Dollar strengthens, all while investors digest Fed Chair Powell's speech.
Can Maker break $1,450 hurdle as whales launch buying spree?
Maker holds steadily above $1,250 support as a whale scoops $1.21 million worth of MKR. Addresses with a 100k to 1 million MKR balance now account for 24.27% of Maker’s total supply. Maker battles a bear flag pattern as bulls gather for an epic weekend move.
Strategic implications of “Liberation Day”
Liberation Day in the United States came with extremely protectionist and inward-looking tariff policy aimed at just about all U.S. trading partners. In this report, we outline some of the more strategic implications of Liberation Day and developments we will be paying close attention to going forward.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.