The Chinese central bank's record 60 billion yuan offshore issuance marks a clear move to curb this type of funding and prevent further depreciation in the currency, Standard Chartered said in a Thursday note.
The issuance, the largest in the central bank's history, comes after recent weakness in the onshore US dollar-yuan (USD-CNY) spot rate, the equity research firm said.
The move, along with the recent tightening of the liquidity conditions for the offshore market-based CNH currency, points to a "firm stance" by The People's Bank of China to support the onshore yuan's (CNY) current position, analyst Becky Liu said.
Standard Chartered expects tight CNH liquidity conditions to continue in the near term, possibly even beyond the Lunar New Year, and the cap in the USD-CNY below 7.35 to remain in the "foreseeable future."
A more visible direction for US policies under Donald Trump's administration should mainly trigger Chinese authorities to reassess the foreign exchange policy, the research firm said.
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