After bulls failed to sustain a break....>

CHINA YUAN: After bulls failed to sustain a break above 6.7200 in early Asian

trading the 6.7000 level is coming back into focus in USDCNH, which last trades

at 6.7062. We have already seen a break below this level in USDCNY which has

opened up a run at 6.6000, marking the July 10 lows. 

- The sharp drop in US real yields following the Fed meeting has undermined the

dollar broadly, while the yuan has likely benefitted from the beat in

manufacturing PMI which while still below 50 came in higher than expectations

and the Dec figure.

- An MNI sources story earlier this month noted that the PBOC does not want a

sharp appreciation and that the current rally could be capped at about 6.7 to

the dollar. So far we have seen little from the PBOC to indicate its

uncomfortableness with recent gains.  

- The yuan's REER has gained 2% since the start of the month, moving back to

July 2018 levels.