The USD/CNY exchange rate has not moved much in recent weeks. Since the US and China agreed to a truce in the trade war on 11 June, the exchange rate has moved within a range of just 7.155 to 7.188, which is not even 0.5%. EUR/USD often makes such a move in a single day, Commerzbank's FX analyst Volkmar Baur notes.

CNY is being kept weaker than it needs to be at present

"However, this is not particularly surprising. After all, USD/CNY is not a free exchange rate but is actively managed by the PBoC. Every day, the Chinese central bank sets a fixed value for USD/CNY, around which the exchange rate can then move within a range of plus or minus 2%. At least, that is the theory. In recent months, it has been noticeable that the exchange rate can sometimes test the upper end of the daily exchange rate range when the CNY comes under depreciation pressure. This was the case from the Trump election in November last year until mid-May."

"On the other hand, however, the PBoC does not seem to really allow the CNY to be stronger (i.e. the exchange rate lower) than the daily fixing. Instead of setting the middle of a band, the daily fixing therefore seems to represent a lower limit at the moment, thus limiting how much the CNY can appreciate. The exchange rate cannot therefore trade within a band of plus or minus 2%, but only with a lower limit and up to 2% above that. "

"The CNY is thus being kept weaker than it needs to be at present, as data on foreign currency holdings at banks and data on foreign currency transactions suggest that the CNY is currently under appreciation pressure. This indicates that the PBoC continues to prefer a weaker CNY, which significantly limits the potential for appreciation, at least in the short term."