CNH-CNY Positive Basis Back To Flat, Yuan Lags Yen Gains, Caixin PMI Out Today

USD/CNH fell to 7.2133 in US trade on Wednesday before stabilizing somewhat. The pair tracks near 7.2260 in early Thursday dealings. CNH rose 0.23% for yesterday's session, below broader USD losses (the BBDXY fell 0.56%). USD/CNY spot finished up at 7.2267. This closes the positive bias that has existed between USD/CNH and USD/CNY for much of past few years.

• CNH saw some benefit from the sharp USD/JPY pull back, which was aided by a hawkish Ueda press conference and lower US yields, with Fed Chair Powell stating a cut could be on the table as soon as September.
• US-CH yield differentials have rolled over sharply to multi month lows, the 2yr spread to +273.5bps, the 10yr to +188bps.
• For USD/CNH we might have expected some downside, given the extent of the USD/JPY pullback. July 25 lows at 7.2032 remained intact through Wednesday trade. We are sub all the key EMAs, with the 200-day near 7.2340 on the topside.
• Today we have the Caixin manufacturing PMI. The market expects a 51.5 print, versus 51.8 prior. Yesterday's official PMI signaled an on-going slowness in economic conditions.
• Onshore equities rallied more than 2% yesterday, while the Golden Dragon index was +0.78% firmer in US trade. Focus is on potential fresh US tech restrictions on China, although Japan and Netherlands may avoid restrictions, see these two BBG links (here and here).