USD/CNH: Back From Fresh YtD Highs, On Intervention Watch

USD/CNH pulled lower in early London trade, finding a base around the CNH7.3250 mark, before trading back towards CNH7.33 at typing. A fresh ’23 high of CNH7.3497 was seen in Asia as the broader USD firmed.

• This comes with Chinese equities now running firmer on the day, more than reversing early losses.
• We point to the loosening of down payments and mortgage rates in the property markets of some lower tier Chinese cities as a supportive factor for the yuan and Chinese stocks, with little else of note crossing.
• A reminder that RTRS sources have flagged that “China's major state-owned banks were seen busy selling U.S. dollars to buy yuan in both onshore and offshore spot foreign exchange markets this week.” One trader told RTRS that "state bank dollar selling has become a new normal to slow the pace of yuan depreciation."
• The bias toward yuan strength in the USD/CNY mid-point fixing moved closer to ’22 extremes on Thursday.
• While the fundamental and technical picture is little changed for USD/CNH, with bulls eying last year’s highs, we have noted that we are at levels that could see policymakers deploy a more forceful defence of the redback.