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USD/CNH Close To 7.1900, As Liquidity Tightness Eases

CNH

USD/CNH tracks near 7.1870 in early Monday Asia Pac trade. This is not too far from Friday session highs in the 7.1930/35 region. On the downside, dips sub 7.1800 were supported. Note USD/CNY spot finished up at 7.1774. The CNY NEER (J.P. Morgan Index) finished down 0.22% on Friday to 124.11.

  • For USD/CNH we remain wedged within key EMAs, on the topside the 100-day sits at 7.1990, while on the downside, the 200 day rests at 7.1640.
  • Less liquidity pressure help reduce downside USD/CNH momentum. TN points spent Thursday and Friday sessions in negative territory. The 1 month implied forward CNH yield is also back close to YTD lows, last near 2.6%.
  • Local equities had a mixed finish to last week the CSI 300 down 0.27%, but the Shanghai Composite up slightly. In Friday US trade, the Golden Dragon Index lost 0.45%.
  • Over the weekend, the authorities tightened rules on short selling in an effort to further stabilize local equities (see this BBG link). Dec Industrial profits data showed profits easing back to 16.8% y/y, from 29.5%.
  • US and China officials also discussed a potential call between US President and China President Xi. This followed the meeting Bangkok between China Foreign Minister Wang Yi and US National Security Advisor Sullivan (see this BBG link).
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