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CNH
USD/CNH's rebound from session lows stalls around CNH7.2500, with the broader USD under some light pressure.
- Key support to watch lies at the 50-day EMA (CNH7.2056), with initial support at the 20-day EMA (CNH7.2126).
- A firmer-than-expected PBoC mid-point fixing and reported USD sales from state-backed banks saw session lows of CNH7.2325 in early Beijing trade.
- Today’s fixing seemed to provide clear pushback against the yuan devaluation speculation seen on Friday, with the spread between fixing expectations (BBG survey median) and the realised fixing moving to the widest level seen in ’24.
- Fixing matters have driven CNH option flow over the last two sessions. Friday saw a bias towards USD/CNH upside, while today has seen put flow dominate.
- Medium-term, expectations for further macro policy easing in China will continue to provide headwinds for the yuan.
- Premier Li and PBoC Governor Pan reiterated that there is room for additional policy easing in recent days.
- Still, don’t expect runaway yuan weakness.
- ING note that while they “believe short-term factors do favour a slightly weaker yuan, any depreciation will be gradual and controlled,” given policymaker bias for the yuan to remain at a reasonable, stable level.
Fig. 1: USD/CNH Vs. Differential Between USD/CNY Mid-Point Fixing & BBG Median Estimate (Pips)
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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