The PBoC continues to set the USD/CNY....>

CHINA YUAN: The PBoC continues to set the USD/CNY mid-point below 6.9000, even

on days when banks look for a fix above the level, as the central bank remains

comfortable in deploying the counter-cyclical adjustment factor in the daily

fixing. USDD/CNH last trades at 6.9290, 150 or so pips lower on the day, after

printing as low as 6.9258 in the wake of the fix.

- Earlier in the session the rate moved back from highs after the PBoC confirmed

that it will offer CNH bills in HK later this month, although the size of the

auction was not disclosed. The auction can be viewed as a method of propping up

the yuan by sapping offshore liquidity. The key point here is that the PBoC has

broken from the quarterly issuance cycle in CNH bills in HK (they only came into

existence late in '18). The latest round of issuance came back in May, so this

could be viewed as a sign that the Bank wants to protect the 7.00 level ahead of

the G20.

- The rate has breached the uptrend support from the May 01 low at CNH6.9380 &

is threatening a clean break of the 21-DMA at CNH6.9280. A move below here would

turn focus to CNH6.9152-60, which saw the lows on Jun 3-5.