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Another day and another cycle high/show above the upper boundary of the well-defined trend channel in USD/CNH (which still holds on a closing basis).
- The latest batch of softer than expected Chinese economic data and the PBoC delivering the widely expected 10bp cut to MLF rate were the main drivers of the yuan weakness early on, before a fairly abrupt pullback from session highs, USD/CNH last shows at ~CNH7.1625, off highs of CNH7.1922.
- Policymakers haven’t shown any particular angst re:: yuan weakness, although one of their previous points of focus was the expectation for the Fed tightening cycle to come to a fairly prompt halt. That assumption will not hold if the Fed acts in line with its latest dot plot.
- Stimulus talk continues to do the rounds in the local media, and offshore investors seem to have acted on the latest news flow on that front, lodging CNY9.2bn of net inflows into mainland stocks via the Hong Kong Stock Connect links. This would have added further tailwinds as the CSI 300 gained 1.6%, as well as providing support for the yuan.
- Benchmark Chinese interest rates (10-Year CGB yields and 5-Year NDIRS) operate a little off of their recent lows.
Fig. 1: USD/CNH
Source: MNI - Market News/Bloomberg
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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