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Thoughts On The LPR Fixings

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Offshore yuan is higher, reversing its earlier move. The PBOC fixed USD/CNY at 6.4464, 3 pips below sell side estimates, indicating a slight preference for a stronger yuan. Just the second fix below estimates in the previous 10 sessions. USD/CNH last down 60 pips at 6.4340.

  • A PBOC researcher has said that the yuan will continue to appreciate against the greenback in the medium and long term. Zhou, the head of the PBOC's financial institute, said the PBOC will eventually drop the exchange rate setting for the yuan when the currency becomes internationalised.
  • Elsewhere, China's 1- & 5-Year Loan Prime Rates were kept on hold at 3.85% and 4.65% respectively. The decision was in line with expectations. LPR rates have been unchanged since April 2020 when the PBOC cut rates to help cope with the impact of the pandemic. The MLF, which is linked to the LPR, was unchanged for the 14th month earlier this week. While there was speculation that the PBOC could increase the LPR's to help reign in rising producer prices, the bank said in its Q1 Monetary Policy report that the pickup in inflation is expected to be transitory and the bank could look through the readings.
  • A USDA report has showed China importing record numbers of feed stock from the US, including corn, according to a USDA report. The increase could help thaw trade relations. Elsewhere China has delayed importing some types of grapes from Australia in the latest sign of trade tensions.

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