CNH: CNY Basket Down For 6th Straight Week, CNH-CNY Basis Back To Zero

USD/CNH has spent most of the Friday session recovering ground (off around 0.20% in latest dealings), although near 7.2840/50, we are still comfortably sub highs this week near 7.3250. CNH is tracking a little over 0.20% firmer versus the USD over the past week, around a third of the broader USD index loss over the same period (for the BBDXY index). 

• Against the majors, CNH has lost ground EUR and the EU related currencies, but rebounded against the yen. The CNY CFETS basket tracker is down, last near 100.06 (per BBG).
• Indeed, this index has fallen in each of the last 6 weeks, see the chart below. The other line is the USD BBDXY index, note the strong directional correlation between the two series. The yuan has been outperforming during bullish USD periods and underperforming during USD bearish periods.
• In the current context, the authorities arguably won't mind softer NEER conditions, given still challenging domestic growth conditions and a good degree of uncertainty facing this year's trade outlook.
• Spot USD/CNY onshore is little change (close to 7.2850), with earlier dips under 7.2800 supported. This leaves little basis between offshore and onshore spot. The average basis between USD/CNH and USD/CNY has been just over 100pips in the past 12 months. 

Fig 1: CNY CFETS Basket & USD BBDXY Index