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CNH: USD/CNH Holding Lower, But Lagging USD/JPY, Risk Reversals Little Changed

CNH

USD/CNH is holding close to session lows in latest dealings, last near 7.1170, which is around 0.25% stronger in CNH terms. Session lows for the pair rest at 7.1158. We are still some distance from lows last week around 7.0735. 

  • Positive spill over from strong yen gains is a yuan tailwind, although the CNH is still lagging. CNH/JPY is at fresh lows sub 19.83, last seen in January of this year. The CNY CFETS basket tracker is also down slightly for the session.
  • The CNH has benefited from the US Presidential debate, which betting markets tipped in favor of Vice President Harris. Reduced odds of a returned Trump Presidency is a yuan positive from a trade standpoint. However, it also reduces the chances of dramatic fiscal shifts as well in the US, which is likely weighing on US Tsys yields, which is aiding yen more than CNH at this stage.
  • USD/CNH risk reversals haven't seen a great shift post the debate. The 3 month is down slightly to 0.1750.
  • Overnight implied vols also remain elevated (last above 9%), we do have the USD CPI print coming up, which is the next major event risk for markets. 
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