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CNH: Outperforms On Exporter Conversion, Fixing Bias, CNH/JPY Bounces Strongly

CNH
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USD/CNH sits near 7.0450 in early Monday dealings, slightly above intra-session lows from Friday's session (7.0387). CNH gained 0.82% last week, outperforming broader USD index losses (DXY fell 0.39% last week). USD/CNY spot finished up at 7.0470 on Friday. The CNY CFETS basket tracker rose 0.20% for Friday's session, pushing the index back to 97.98, close to the mid point of ranges since late August. 

  • CNH saw benefit from the firmer CNY fixing bias through last week. The cumulative USD/CNY fixing error was -99pips for last week's 3 trading sessions (China markets were closed Monday and Tuesday). This suggests little push back in terms of recent yuan gains.
  • Broader USD weakness was also mostly evident, although as noted above CNH gains outperformed broader USD index shifts. This was particularly evident in terms of the the CNH/JPY bounce. After the pair hit fresh lows of 19.6850 we rebounded strongly back towards 20.50 by the end of last week. Dovish BoJ rhetoric from Governor Ueda weighed on yen.
  • The other focus point into end September will exporter conversion of FX receipts back into the yuan. Bloomberg noted such flows picked up last week post the Feds 50bps cut.
  • For USD/CNH downside, not much stands in the way of a test of 7.00 from a tech levels standpoint. On the topside, the 20-day EMA is back near 7.1080.
  • On the data calendar, it is quiet until Wednesday's 1yr MLF print. No change is expected (currently at 2.30%).
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USD/CNH sits near 7.0450 in early Monday dealings, slightly above intra-session lows from Friday's session (7.0387). CNH gained 0.82% last week, outperforming broader USD index losses (DXY fell 0.39% last week). USD/CNY spot finished up at 7.0470 on Friday. The CNY CFETS basket tracker rose 0.20% for Friday's session, pushing the index back to 97.98, close to the mid point of ranges since late August. 

  • CNH saw benefit from the firmer CNY fixing bias through last week. The cumulative USD/CNY fixing error was -99pips for last week's 3 trading sessions (China markets were closed Monday and Tuesday). This suggests little push back in terms of recent yuan gains.
  • Broader USD weakness was also mostly evident, although as noted above CNH gains outperformed broader USD index shifts. This was particularly evident in terms of the the CNH/JPY bounce. After the pair hit fresh lows of 19.6850 we rebounded strongly back towards 20.50 by the end of last week. Dovish BoJ rhetoric from Governor Ueda weighed on yen.
  • The other focus point into end September will exporter conversion of FX receipts back into the yuan. Bloomberg noted such flows picked up last week post the Feds 50bps cut.
  • For USD/CNH downside, not much stands in the way of a test of 7.00 from a tech levels standpoint. On the topside, the 20-day EMA is back near 7.1080.
  • On the data calendar, it is quiet until Wednesday's 1yr MLF print. No change is expected (currently at 2.30%).