CNH: USD/CNH Above 7.1200, But Yuan Outperforms Higher Beta FX

USD/CNH tracks near 7.1200 in early Wednesday dealings. Intra session highs from Tuesday were just above 7.1300. CNH lost a little ground on Tuesday but outperformed the higher beta currencies which faltered amid sharp risk off in the equity space. USD/CNY spot finished up just above 7.1200 as well. The CNY CFETS basket tracker moderated slightly to 98.15, after rising nearly 0.70% for the prior two sessions. Yen rallied nearly 1% on Tuesday. 

• For USD/CNH technicals, above Tuesday intra-session highs the descending 20-day EMA rests near 7.1420. Recent lows remain intact at 7.0710 from the end of August.
• On the data front today we have the Caixin services PMI out. The market expects a 51.8 outcome, versus 52.1 prior. The composite Caixin PMI also prints, there is no consensus for this print, with the prior being 51.2.
• Broader risk trends will also be in focus today, although China equities typically display a lower beta with respect to such moves. To recap, the CSI 300 index managed a modest 0.26% gain yesterday but remains close to recent lows. In Tuesday US trade, the Nasdaq Golden Dragon index lost 0.86%.
• The bias around onshore CGB yields remains lower, particularly at the front end (2yr ending under 1.43% yesterday). Still, US yield shifts are likely to dictate US-CH yield differential trends. Overnight weakness amid softer US data (ISM remaining well below 50.0), should see yield differentials move off recent highs.