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Steady CNH Start, Focus On Today's USD/CNY Fixing

CNH

USD/CNH has had a relatively steady start to Thursday trade. We were last near 7.3020, only down a touch from end Wednesday levels in US trade. This is underperforming a slightly softer USD trend against the majors with both the BBDXY and DXY indices ticking lower.

  • There will be focus on today's fixing given the tendency for higher settings in recent weeks. The fix has risen on 9 out of 11 days over this period.
  • We have had firmer USD bouts during this period, but the chart below plots illustrates that the USD has moved off highs in recent session, as the rolling weekly rate of change turns negative.
  • The other line on the chart is the weekly rate of change in the USD/CNY fixing. Notwithstanding the different betas between the two series, we might have expected a lower USD/CNY rate of change over the past week given the USD softness.
  • For today's fix the model estimates will likely be expecting a lower estimate relative to yesterday, given broader USD losses, although the official 4:30pm close was higher at 7.2734 yesterday.
  • An unchanged or higher USD/CNY fixing today will reinforce bearish yuan expectations.

Fig 1: Rolling 1 Week Change In BBDXY USD Index & USD/CNY Fixing

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USD/CNH has had a relatively steady start to Thursday trade. We were last near 7.3020, only down a touch from end Wednesday levels in US trade. This is underperforming a slightly softer USD trend against the majors with both the BBDXY and DXY indices ticking lower.

  • There will be focus on today's fixing given the tendency for higher settings in recent weeks. The fix has risen on 9 out of 11 days over this period.
  • We have had firmer USD bouts during this period, but the chart below plots illustrates that the USD has moved off highs in recent session, as the rolling weekly rate of change turns negative.
  • The other line on the chart is the weekly rate of change in the USD/CNY fixing. Notwithstanding the different betas between the two series, we might have expected a lower USD/CNY rate of change over the past week given the USD softness.
  • For today's fix the model estimates will likely be expecting a lower estimate relative to yesterday, given broader USD losses, although the official 4:30pm close was higher at 7.2734 yesterday.
  • An unchanged or higher USD/CNY fixing today will reinforce bearish yuan expectations.

Fig 1: Rolling 1 Week Change In BBDXY USD Index & USD/CNY Fixing

Keep reading...Show less