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Futures Market Could Be On The Horizon

CNH

PBOC fixed USD/CNY at 6.5384, 7 pips below sell side estimates. Offshore yuan has strengthened, consolidating gains from yesterday. USD/CNH last down 26 pips at 6.5396, breaking below yesterday's nadir. Some resistance seen around this level, a break below the March 26 low of 6.5379 is the next target for bears.

  • A PBOC paper published late Tuesday suggests that establishing a futures market for the yuan exchange rate could help improve the pricing mechanism in onshore market. The piece also posited that domestic participants could use offshore futures markets to hedge forex risks.
  • The yuan's recent fall against the dollar is a normal and healthy recalibration and was driven by risk aversion as the pandemic regained momentum in Europe and inflation expectations rose in the U.S., which narrowed interest rate spread with China, Guan Tao, a former official at China's State Administration of Foreign Exchange, wrote in a commentary in the Economic Daily

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