On-Shore USDCNY Close Friday August 4, 2017

By Vicki Schmelzer

     NEW YORK (MNI) - On-shore Chinese yuan CFETS close 

23:30 local    23:30 local

time close      time close      16:30 local time CFETS    16:30 local time CFETS

                                  reference rate close     reference rate close

August 4          August 3                    August 4                  August 3

--------------------------------------------------------------------------------

6.7289              6.7172                      6.7181                    6.7233

     USDCNY closed at CNY6.7289, after trading in a CNY6.7169 to CNY6.7298 range

(Bloomberg levels). 

     On June 27, dollar-yuan topped out at CNY 6.8442, before falling off

sharply as big Chinese banks sold dollars to prop up the yuan, purportedly at

the prompting of the People's Bank of China (PBOC). 

     Subsequently, USDCNY has moved steadily lower, in line with an overall

softer U.S. dollar tone. The August 1 USDCNY low near CNY6.7158 was the lowest

since Oct. 12, 2016, when the pair bottomed at CNY6.7133. 

     In terms of larger highs and lows, USDCNY posted a high of CNY6.9648 Dec.

28, 2016, very close to the CNY6.9649 high seen Dec. 16, 2016, which was the

weakest yuan level since May 21, 2008, when USDCNY topped out at CNY6.9743. 

     The USDCNY low of CNY6.4528, seen March 31, 2016, was the lowest (highest

yuan level) since Dec. 11, 2015, when the pair bottomed at CNY6.4390. The March

31 close of CNY6.4536 was the lowest since Dec. 10, when the pair closed at

CNY6.4386. 

     Back on Jan. 12, 2016, the PBOC intervened heavily in order to narrow the

spread between the on-shore and off-shore yuan, which had widened to over +1,400

pips in the first week in January as speculators entered into CNH shorts on

expectations of a higher USDCNY. 

     The PBOC was forced to intervene as one of the conditions of the yuan's

entry into the IMF's SDR basket was to close the gap. 

     In subsequent months in 2016, the CNH-CNY spread narrowed markedly,

reflecting overall improved risk appetite. The spread widened in response to the

June 23rd Brexit vote, but later narrowed again. 

     Beginning in December 2016, the CNH-CNY spread turned negative on several

occasions and the spread subsequently traded at extremely wide negative levels. 

     Analysts attributed the negative spreads, seen at times earlier in 2017 and

again more recently, to tighter CNH funding conditions and positioning, not

improved risk sentiment. 

     Friday's CNH-CNY closing spread (at 11:30 p.m. local time) was +65 pips

versus +101 pips Thursday and compared to the -607 pips seen May 31. The June 26

spread of +110 pips was the widest positive spread since Dec. 30, when the

spread stood at +215 pips. 

     The Feb. 3, 2017 spread was -719 pips, which was the widest negative spread

since the -891 pip spread seen Jan. 5. On Dec. 19, 2016, the spread was -276

pips, which was the most negative spread of 2016. 

     On Nov. 23 and Nov. 25, 2016, the CNH-CNY spread widened to +287 pips. This

was the widest positive spread since Brexit in late June 2016, when on June 27,

the closing CNH-CNY spread of +396 pips was the widest, i.e. most risk averse,

since Feb. 3, 2016 when the spread was also +396 pips. 

     On Jan. 2, 2017, the off-shore yuan fell to a new life-time low versus the

dollar around CNH6.9895. Since then, overall the CNH has strengthened in line

with the CNY.

     Dollar-yuan (offshore) was trading near CNH6.7355 Friday, after holding in

a CNH6.7200 to CNH6.7367 range. 

     On August 1, USDCNH took out the prior 2017 low near CNH6.7234, seen June

1, to post a low near CNH6.7163, the lowest level seen since Oct. 11, 2016, when

the pair bottomed at CNH6.7145. 

     Less than three months ago, USDCNH posted a high near CNH6.9177 May 9, the

highest level since March 9, when the pair saw a high near CNH6.9319.

     Earlier, the People's Bank of China set the yuan central parity fixing

versus the U.S. dollar at CNY6.7132 versus CNY6.7211 Thursday.

     Friday's parity rate was the highest yuan fixing level since Oct. 11, 2016,

when the parity rate was set at CNY6.7098.

     These settings compared to the CNY6.9526 fixing, seen Jan. 4, 2017, which

was the weakest yuan fixing level since May 21, 2008.  

--MNI New York Bureau; tel: +1 212-669-6438; email: vicki.schmelzer@marketnews.com

[TOPICS: MTABLE,M$A$$$,M$Q$$$,M$$FI$,M$$FX$]