CNH's Wednesday Drop Largest In 2 Months, LPRs Seen On Hold Today

Spot USD/CNH continued to climb post the Asia close on Wednesday, getting to 7.2370 in NY trade. We sit slightly lower in early Thursday dealings, last around the 7.2320 level. CNH lost 0.54% For Wednesday's session, the fourth straight loss, and the largest daily dip in around 2 months. Onshore spot finished up at 7.2233, while the CNY NEER (J.P. Morgan index) lost a further 0.37% to 119.10, continuing the strong recent downtrend for the index. We are now back to early 2021 levels.

• In terms of upside USD/CNH targets, July 10 highs sit just above 7.2490. The 20-day EMA sits back closer to 7.2000 on the downside.
• We are seeing risk reversals trend higher, the 1 month last at 0.405, but this is well below earlier 2023 highs. Implied vols have also firmed a touch, last around 5.82% for the 1 month, but also remain comfortably within recent ranges.
• On the data front today, the 1yr and 5yr LPRs due. The market consensus is for no change in either rate, the 1yr sits at 3.55% currently, the 5yr at 4.20%. This is the strong consensus with none of the forecasters surveyed by Bloomberg expecting a change.
• The Golden Dragon equity index rose in US trade, +0.69%, the first gain in four sessions. Onshore equities were weaker yesterday but finished away from session lows (the CSI 300 down by 0.11%).