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*Slips On Higher US Yields, Jan New & Used Home Prices Out Today

CNH
  • *With chart attached below

USD/CNH rebounded from close to 7.1900 late in the Asia Pac session to reach 7.2050 by NY trade. In early Friday trade we track near 7.2025. CNH ended its winning streak on Thursday, albeit only losing marginal ground against the USD. Onshore spot finished up at 7.1939, while the CNY NEER (J.P. Morgan Index) edged down slightly to 124.53.

  • Like elsewhere, USD/CNH gravitated higher as the USD found support from higher yields. The downtick in initial jobless claims and Fed speak cautioning against early cuts were the main drivers of this trend.
  • For USD/CNH, US-CH yield differentials are mostly pushing higher. The chart below plots spot against the 2yr and 10yr government bond differential. Such trends will bias USD/CNH higher all else equal, although clearly the authorities are guarding against weakness beyond 7.2000 in onshore spot.
  • In the equity space, we had solid gains for the CSI 300 (+0.86%) and the Shanghai Composite (+1.27%) yesterday, while regulatory headlines continued to flow after the onshore close (see this link). in US trade, the Golden Dragon index rose 1.4%, likely aided by positive tech spill over from US markets.
  • On the data front today we have new and used home prices for Jan.

Fig 1: USD/CNH Versus US-CH 2yr & 10yr Yield Differentials

Source: MNI - Market News/Bloomberg

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