Offshore Yuan Approaching Friday Lows

Offshore yuan weakens further as the session wears on, USD/CNH up 82 pips at 6.4837, close to Friday's high of 6.4863. Chinese risk assets are under pressure with equity markets down around 1.5%. Fears of increased regulatory burden/scrutiny from the Chinese authorities evident in the wake of the crackdown on the education sector appears to be weighing on general sentiment.

• Comments from the meeting of US and Chinese officials have not been encouraging. Sino-US relations are said to face difficulties. Vice Foreign Minister Xie told US Deputy Secretary of State Sherman that some Americans seek to depict China as an imagined enemy, but did note that China was willing to reach a deal with the US on an equal footing. There were reports over the weekend that the Biden administration has no immediate plans to impose sanctions on Chinese officials in response to the Microsoft Exchange hack, which should at least help stop relations from deteriorating further.