June 13, 2024 03:22 GMT
SAFE Vows To Maintain FX Stability, China Underperforming Global Equity Rebound
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USD/CNH has drifted higher, last sitting near 7.2645, just off session highs above 7.2650. Pre US CPI levels rested close to 7.2700 from Wednesday trade (while post lows came in at 7.2500).
- CNH losses are more modest compared to the G10, where some of the majors, including yen, have lost around 0.20% against the USD so far today.
- Spill over from higher USD/CNY levels, which has firmed back above 7.2500 has likely weighed on CNH at the margins. We are just below YTD highs of 7.2545.
- Comments have crossed the wires a short while ago from China's SAFE, noting FOREX supervision will be improved, and that FX stability will be guarded (per Bloomberg). This comes amid recent signs of stronger domestic capital outflow pressures.
- In the cross asset space, onshore equities are lagging the more positive risk-on tone seen in global markets in recent sessions. For the past month we have seen the China to global equities ratio trend lower, see the chart below (with USD/CNH also on the chart, inverted).
Fig 1: USD/CNH (Inverted Versus China To Global Equity Ratio)
Source: MNI - Market News/Bloomberg
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