Broad risk on flows have seen the yuan and....>

CHINA: Broad risk on flows have seen the yuan and Chinese stocks rally strongly

today with USDCNH down 0.3% last, having briefly dipped below 6.77. While dollar

weakness has been broad based, this has not stopped EURCNH from extending its

drop below neckline support. Yen weakness has also helped send CNHJPY to fresh

ytd highs. 

- This comes as equity markets have extended their gains amid a bumper day for

Asian stocks. The Hang Seng has broken cleanly into a higher trading range after

taking out its Dec 4 highs. 

- Risk on sentiment has failed to take hold in the rate market after key levels

of resistance held in 2 and 10 year swap markets while 10 year bond futures held

above their Jan 13 lows. 

- This week saw the PBOC skip OMO for five straight days resulting in a CNY770

billion withdrawal, suggesting that easing measures to date have been sufficient

following the latest 0.5% reserve requirement ratio cut.