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Outperforming US Yield Stability, But Positive Equity Sentiment Is Helping

CNH

USD/CNH has been more range bound through today's session, unable to make new lows (7.0293 today versus just under 7.02 yesterday). Upside gains have also been limited though, with selling interest emerging above 7.0600. Softer activity data outcomes haven't helped sentiment, although follow through pressures have been limited. The USD is finding some support against the majors (most notably JPY) as US yields have stabilized, which could also be generating some stability in USD/CNH.

  • The chart below overlays USD/CNH against the 2yr US-CH government bond differential. The two series don't move one for one, particularly over the longer term, but CNH has outperformed the rate differential recently.

Fig 1: USD/CNH & US-CH 2yr Yield Differential

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USD/CNH has been more range bound through today's session, unable to make new lows (7.0293 today versus just under 7.02 yesterday). Upside gains have also been limited though, with selling interest emerging above 7.0600. Softer activity data outcomes haven't helped sentiment, although follow through pressures have been limited. The USD is finding some support against the majors (most notably JPY) as US yields have stabilized, which could also be generating some stability in USD/CNH.

  • The chart below overlays USD/CNH against the 2yr US-CH government bond differential. The two series don't move one for one, particularly over the longer term, but CNH has outperformed the rate differential recently.

Fig 1: USD/CNH & US-CH 2yr Yield Differential

Keep reading...Show less