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Firms On Broader USD Softness, Potentially Further Mortgage/Deposit Rate Cuts In Focus


Like elsewhere, USD/CNH pulled back sharply in NY trade on Tuesday, as the USD suffered broad based losses (BBDXY down 0.40%). From highs just above 7.3100, USD/CNH pulled back to the 7.2800 level. We track around 7.2830 currently, with CNH having recorded a 0.13% gain for Tuesday's session. USD/CNY finished at 7.2807, while the CNY NEER (J.P. Morgan Index) was close to flat, last near 121.82.

  • Headlines crossed late yesterday that China's largest banks were preparing to cut interest rates on outstanding mortgages (reportedly only on first homes) and deposit rates. This would be the third time this year large lenders have cut such rates. The move aimed at driving further consumption/housing activity and aiding banks' profit margins (see this link for more details).
  • The immediate response from markets was reasonably muted in terms of CNH and local equities. The CSI 300 finished 1% higher, but remains below Monday session highs above 3900 (closing yesterday at 3790). The Golden Dragon index rose 3.7% in US trade, amid broad based gains in global equities.
  • US Commerce Secretary Raimondo stated that US businesses are indicating that investing in China is becoming too risky (see this link). Her trip to China wraps up today.
  • The local data calendar is empty today while tomorrow delivers official August PMI prints. The market looks for manufacturing at 49.2 (prior 49.3), services at 51.1 (prior 51.5).

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