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Bond yield spreads between China and....>

DOLLAR-ASIA
DOLLAR-ASIA: Bond yield spreads between China and the U.S. continue to narrow,
with the 1-year spread falling to just 66bps at the time of writing, the lowest
level since July 2009.
- The spread has fallen a massive 145bps since the start of the year even as
USDCNH has weakened. The narrowing yield spread poses an increasing risk to the
Chinese yuan, which has thus far remained insulated from the round of EM FX
weakness.
- Any move higher in USDCNH would likely exacerbate Asian FX selling,
potentially triggering a significant bout of weakness as regional central banks
look to maintain currency competitiveness against each other.

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