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USD/CNH Breaches 7.1900 Before Retracing

CNH

USD/CNH sits comfortably off late Tuesday session highs just above 7.1900, which we got to in NY trade. The pair last back under 7.1800, with some CNH support flowing through from softer USD trends against safes havens like yen, which came after the Fitch Ratings downgrade news. Still, CNH lost 0.55% for Tuesday's session, while USD/CNY finished just under 7.1780. The CNY NEER (J.P. Morgan Index) still climbed 0.11% to 121.51, as the currency marginally outperformed broader USD gains elsewhere.

  • The local data calendar is empty today, but we do get the Caixin services PMI tomorrow.
  • The PBoC stated late yesterday that it will guide banks to guide existing mortgage rates lower (see this link for more details). This came after the NDRC stated yesterday that it will support credit for private sector firms, particularly in the SME space. These are the latest announcements in the aftermath of last week's Politburo meeting.
  • Reuters also stated that China's currency regulator has asked banks to reduce or delay dollar buying to curb depreciation pressures (see this link).
  • The CNY fixing error remains skewed towards limiting depreciation pressures, but we are away from recent wides. This may change if we see USD/CNY breach the 7.2000 handle.
  • In the equity space, the Golden Dragon Index lost just over 2%, although we were 7.7% higher in the prior two sessions.
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