USD/CNH Back From YtD Highs On Talk OF State-Owned Bank Intervention

USD/CNH threatened to test CNH7.10 in Asia-Pac dealing, as it registered another fresh YtD high, before a pull away from extremes after RTRS sources suggested that state-owned banks were seen selling dollars vs. yuan in the spot market from Thursday and into Friday. RTRS also noted that the move “appeared to slow the pace of yuan declines rather than forcefully capping the currency at any particular level.” USD/CNH showed below the CNH7.06 mark in early London dealing, before reclaiming the CNH7.07 figure as the broader USD stabilised.

• There wasn’t any overt steer from the PBoC in the daily USD/CNY mid-point fixing.
• A turnaround in Chinese stocks, which pared early morning losses, will have aided the Beijing afternoon bid in the yuan, although the Stock Connect schemes were closed on Friday owing to a holiday in Hong Kong, meaning there wasn’t a “real” capital flow element apparent on that front.
• Benchmark 10-Year CGB yields and 5-Year IRS rates nudged away from YtD lows, even as the latest BBG survey revealed that the median economist now expects a 25bp cut to the PBoC’s RRR by the end of Q323 (vs. Q423 in the prior survey), providing a modestly yuan-supportive factor.