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USD/CNH Back Sub 7.2000 As Politburo Vows To Keep Yuan Stable


USD/CNH got to around 7.2135 late in Asia Pac trade on Monday, before pulling back towards 7.1800 in the NY session. We sit around 7.1860/70 currently, which left the currency basically unchanged versus closing levels last Friday in NY. USD/CNY spot ended near 7.1875, which left the CNY NEER (J.P. Morgan) also around flat versus Friday levels (120.47).

  • The main focus late yesterday was Politburo headlines which crossed post the July meeting. The market took some comfort from the meeting notes, which recognized the challenges facing the Chinese economy, particularly in terms of insufficient domestic demand. There is also scope for greater housing support, with the meeting dropping the line 'houses are for living in, not speculation'.
  • We saw a sharp rally in the Golden Dragon index during US trade, up 4.21%. This is the largest one-day rally since the start of February this year. Onshore equities finished lower yesterday, while the HSI fell over 2%.
  • Still, there was no indication from the read out that large scale stimulus is on the way. So, the market may await further details around efforts to boost domestic demand/support the housing market.
  • The meeting readout also included an emphasis on keeping the yuan stable, which was included for the first time since Q2 2021. Hence, we may see move efforts to stabilize the currency.

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