USD/CNH Back To 7.15 After A Blip Higher On Moody’s Outlook Tweak

CNH moved up to a fresh session high of 7.1596 in the wake of Moody’s altering China’s sovereign outlook to negative, alongside an affirmation of its A1 rating.

• Moody’s focused on familiar sources of worry in the press release, namely the support required for local governments and SOEs, along with headwinds for the property sector. As a result, the agency cautioned on “increased risks related to structurally and persistently lower medium-term economic growth.”
• A broader based USD bid also factored into the uptick during the London handover, with dovish ECB speak the catalyst there.
• That move has moderated from extremes, aided by slightly better than expected Eurozone services PMI data and the outcome of the short-term ECB consumer inflation expectations survey, leaving USD/CNH around the 7.15 mark.
• Familiar technical parameters remain in play, with forays below the 200-DMA relatively short-lived for now (despite 2 closes below during the last 5 sessions).
• A quick reminder that earlier Reuters headlines indicated that state banks are selling USD/CNY (via swaps), with the aim of encouraging exporters to convert earnings proceeds into the yuan before year end.
• Elsewhere, familiar sources of worry generated negative equity sentiment and another round of net outflows via the HK-China Stock Connect schemes (CNY7.5bn sold on the day), which helped put a base in for USD/CNH in Asia hours.