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CNH Remains On The Backfoot Amid Equity & Yield Headwinds

CNH

USD/CNH was mostly range bound post the Asia close on Tuesday, finding selling resistance above 7.0700, but unable to break back sub 7.0600 in a meaningful way. CNH lost 0.25% for the session, following Monday's 0.32% loss. The CNY NEER (J.P. Morgan index) edged down a further 0.09% to 123.53, fresh lows back to Nov 2022.

  • Highs in USD/CNH from early last Friday around 7.0750 remain intact, but the pair has recovered strongly from recent lows sub 7.0200, which came about following increased rhetoric from the authorities and reported onshore activity from state owned banks to curb depreciation pressures.
  • Equity and yield headwinds persist for CNH, while the fixing mechanism doesn't show strong pushback on CNY weakness.
  • The Golden Dragon index lost 2.4% in US trade on Tuesday, after onshore equities continued to track lower, with the CSI300 back to early January levels. Yields are biased lower, albeit with the 10yr unable to sustain a move 2.70%.
  • Economic headwinds are weighing on the yield backdrop, while economic decoupling, particularly in the tech space, is a clear equity headwind. Yesterday saw just under 8bn yuan of Northbound stock connect outflows.
  • The local data calendar remains quiet today.
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