Offshore Yuan Regains Poise But Forward Points Still Bearish

Offshore yuan strengthened on Wednesday, the move lower in USD/CNH accelerating after the FOMC rate announcement. The pair fell from opening highs of 6.5272 and declined throughout the sessions to lows of 6.4846, last up 30 pips at 6.4890 but holding near the bottom of the range. Despite the move lower, USD/CNH 12-month forward premiums are still at their highest since 2017 at 1885.00. Meanwhile the recent price swings have taken CNH 1-month implied volatility to the highest since May.

• Chinese assets remained under pressure yesterday after the recent selloff, there were reports that the CSRC convened a virtual meeting with major investment banks late yesterday in order to assuage some fears over the private education industry crackdown. This follows several stories in state run media that suggested the stock selloff is overdone. Chinese stocks listed in the US rebounded yesterday, which could be a sign the selloff has run its course.
• On the geopolitical front US Senator Risch said "Taiwan's absence from the World Health Assembly over the last several years is yet another example of the Chinese government's push to isolate Taiwan internationally, including on issues that matter to all of us like public health". The US is trying to help Taiwan regain its WHO observer status.