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CNH: Firmer Yen/Lower US Yields Helping Offset Tariff Threat

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USD/CNH spot is tracking near 7.2750 in latest dealings. Earlier highs were at 7.2939, which was above the 50-day EMA (near 7.2875), but we found selling interest on this move. CNH is around 0.15% weaker against the USD, roughly in line with BBDXY index gains of the same magnitude. 

  • Market focus remains on Trump tariff risks. Earlier headlines around 25% tariffs on Canadian and Mexican imports from Feb 1, seeing broader USD sentiment surge. Trump appears willing to talk to China first, at least based off earlier headlines, although the tariff threat remains on the table.
  • USD/JPY is weaker, back under 155.00 and close to session lows. US Tsy yields remain lower across the board, not reacting much to these latest tariff threats. This is likely helping curb USD/CNH upside.
  • Spot USD/CNY is a little higher, but at 7.2750, remains comfortably off recent highs.
  • CNY volumes have dominated the FX options space so far today. Per DTCC on BBG we have seen just under $1.7bn in volumes. Some of the larger transactions have been CNY calls, albeit at strikes above recent highs in spot (7.34-7.38 etc). CAD volumes are next largest at just under $750mn.
  • USD/CNH risk reversals hold higher, but sub recent highs. The 1 week risk reversal last around -0.20, against recent highs just above flat. The 1 month is around -0.10. 

 

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USD/CNH spot is tracking near 7.2750 in latest dealings. Earlier highs were at 7.2939, which was above the 50-day EMA (near 7.2875), but we found selling interest on this move. CNH is around 0.15% weaker against the USD, roughly in line with BBDXY index gains of the same magnitude. 

  • Market focus remains on Trump tariff risks. Earlier headlines around 25% tariffs on Canadian and Mexican imports from Feb 1, seeing broader USD sentiment surge. Trump appears willing to talk to China first, at least based off earlier headlines, although the tariff threat remains on the table.
  • USD/JPY is weaker, back under 155.00 and close to session lows. US Tsy yields remain lower across the board, not reacting much to these latest tariff threats. This is likely helping curb USD/CNH upside.
  • Spot USD/CNY is a little higher, but at 7.2750, remains comfortably off recent highs.
  • CNY volumes have dominated the FX options space so far today. Per DTCC on BBG we have seen just under $1.7bn in volumes. Some of the larger transactions have been CNY calls, albeit at strikes above recent highs in spot (7.34-7.38 etc). CAD volumes are next largest at just under $750mn.
  • USD/CNH risk reversals hold higher, but sub recent highs. The 1 week risk reversal last around -0.20, against recent highs just above flat. The 1 month is around -0.10.