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USD/CNH Back To 7.1200 Handle, LPRs Expected To Be Held Steady

CNH

USD/CNH's pull back found support just under 7.1200 in NY trade on Tuesday. We last tracked near 7.1250, after a CNH gain of 0.32% for Tuesday's session. This was broadly in line with the BBDXY fall (-0.30%). USD/CNY spot finished at 7.1185, while the NEER (J.P. Morgan index) was down a touch, the index last at 123.54.

  • Highs in USD/CNH yesterday were at 7.1525/30, while recent lows come in near 7.0975.
  • On the data front today we have the 1yr and 5yr LPR decisions. The consensus looks for now change (1yr currently at 3.45%, 5yr at 4.20%). Only one economist surveyed by BBG sees a 10bps cut in the 1yr rate. The other 14 are forecasting no change.
  • HSBC stated that the typical seasonal support period for the yuan (Dec/Jan, as exporters convert earnings back into the local currency), may not be as supportive in the current environment, given the yuan's disadvantage to the US, as well as local equity underperformance.
  • The Golden Dragon index rebounded 1.81% in US trade on Tuesday. This followed a modest 0.14% rise in the onshore CSI 300 yesterday. Property woes curbed overall gains in the index.
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