USD/CNH: Decline stalls ahead of China PMI data

USD/CNH is taking a bear breather with investors awaiting China data, which is expected to show continued expansion of the manufacturing activity.

At press time, the pair is trading largely unchanged on the day near 6.45, having declined by 0.36% and 0.35% on Thursday and Friday, respectively.

The offshore yuan (CNH) gained ground in the second half of the last week, as the People's Bank of China sucked out liquidity from the system to rein in leverage, pushing the overnight repo rate (borrowing cost in the money market) to the highest level since March 2015.

China's Caixin Manufacturing Purchasing Managers' Index (PMI), which focuses on small and medium-sized export-oriented units, is forecast to decline slightly to 52.7 in January from December's 53.00. However, the metric is expected to stay above 50.00, indicating expansion.

The offshore yuan may resume the ascent, pushing USD/CNH lower for the third straight day if the PMI beats estimates. China's Manufacturing PMI published by the National Bureau of Statistics (NBS) dipped to 51.3 in January, data showed on Sunday, but remained comfortably in expansion territory.