Benefitting From Rumours Surrounding Equity Support Scheme

USD/CNH has been reluctant to retrace the Asia-Pac move lower despite the pull away from worst levels of the day for the broader greenback. USD/CNH prints ~30 pips above session lows around CNH7.1660. Highs of CNH7.1997 were lodged early in Asia trade.

• We believe that the offshore-centric nature of the funding of the potential Chinese equity rescue package touted by BBG sources will be playing a meaningful role here, owing to sheer size of the rumoured ~CNY2tn support scheme.
• Northbound inflows via the HK-China Stock Connect links was modest on Tuesday (CNY3.8bn), but an incremental positive for the yuan.
• Elsewhere, the PBoC maintained its lean vs. further yuan depreciation via its daily mid-point fixing (notable although nowhere near the bias level seen at points during ’23).
• Funding remains tight in the CNH forwards space, with TN points in positive territory, a little shy of the recent highs.
• Previously outlined, well-defined technical parameters remain in play for USD/CNH.