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Correction - Still Underperforming Softer USD Trend, NEER Close To YTD Lows

CNH

USD/CNH was range bound post the Asia close, the pair unable to sustain downside momentum beyond the 6.8750 level. We currently track around the 6.8800 level, with CNH posting a modest gain for Tuesday's session, but still underperforming softer USD sentiment elsewhere. In CNY NEER terms, the index fell a further 0.21% and is now sub 125.00 (J.P. Morgan Index). We are now close to YTD lows for this index (124.926 back in late Jan).

  • We saw a decent rise in the Golden Dragon index through US trading, up 3.5%. The plan to spin off of Alibaba (into 6 units) is seen as unlocking value in the company. China equity performance relative to the rest of the world has stabilized somewhat but remains off recent highs.
  • The modest wedge for CNH compared with softer underlying USD trends elsewhere persists though. The rebound in US yields has pushed yield differentials back in favor of higher USD/CNH levels, although this didn't benefit the USD against the majors through Tuesday.
  • Elsewhere, China Premier Li Qiang will speak at the Boao forum on Thursday.
  • Also, US Secretary of State Sullivan reportedly spoke with China Foreign Minister Wang Yi last Friday, although nothing official has been announced about the call from either side. It comes ahead of Taiwan President's Tsai Ing-wen planned stop over in the US on the way to South America.

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