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CNH Outperforms, With Housing Measures Aiding Sentiment, Caixin PMI On Tap Today


MNI (Australia) CNH gained 0.38% for Thursday's session, its best gain in 2 weeks. From highs around 7.3000 the pair fell back sub 7.2700 in NY trade, before support emerged. We closed in NY at 7.2755, which is where we currently track in early dealing today. Spot USD/CNY closed sub 7.2600, while the CNY NEER (J.P. Morgan index) surged 0.62% to 122.22, fresh highs back to early June.

  • CNH sentiment was buoyed by the PBoC and financial regulator announcing that the down payment requirement for first-time home buyers would be lowered to 20%, and second-time home buyers to 30% (see this link). A rate cut for existing mortgages on first-time homes was also approved from September 25.
  • There is also continued focus on intervention efforts to curb CNY depreciation pressures, with a focus on exporter swaps and state bank spot transactions (see this link for more details).
  • For spot USD/CNH, focus is likely to be on whether we can sustain a downside break of 7.2700, which has been a support point through the second half of August, see the chart below.
  • Onshore equities finished 0.61% weaker for the CSI 300 yesterday, with the real estate index down 5.32%. Northbound stock connect outflows continued. Any better sentiment in this space may aid CNH today. Note the Golden index fell 0.56% in US trade on Thursday.
  • Today on the data front we have the Caixin manufacturing PMI on tap for August, 49.0 is forecast (49.2 was the July read).

Fig 1: USD/CNH Spot, Support Has Held Around 7.2700 In Recent Weeks

Source: MNI - Market News/Bloomberg

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