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USD/CNH Above 7.1400, CNY NEER To Fresh Lows, Easing Speculation Continues

CNH

USD/CNH was mostly on the front foot post the Asia close on Friday, although found selling interest above 7.1450. The pair currently tracks just above 7.1400, with CNH having lost 0.32% for Friday's session. USD/CNY finished just above 7.1300 for the session, while the CNY NEER continued to lose ground, down a further 0.32% to fresh lows near 121.90 (J.P. Morgan index).

  • There was fresh easing speculation on Friday in the aftermath of the May inflation figures. Following its recent guidance for banks to lower interest on deposits, this may indicate a higher likelihood of a cut to its medium-term lending facility rate as soon as this week, policy advisors and analysts told MNI on Friday (see this link for more details).
  • Note the 1yr MLF rate will be announced on Thursday. We are also still waiting for May credit/new loans data.
  • Pressure was evident in terms of China yields, although more so at the back end of Fri. The 10yr government bond yield finishing at 2.68%.
  • Elsewhere, PBoC Governor Yi Gang downplayed deflation fears in a speech released by the PBoC on Friday. The Governor stated inflation will likely pick up to 1% by Dec (see this link).
  • On the geopolitical front, US Secretary of State Blinken is expected to travel to China later this week (expected to be there on the 18th, this coming Sunday).
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