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USD/CNH Close To 7.2600, US-CH 2yr Yield Differentials Back Close To April Highs

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The uptrend in USD/CNH remained intact on Thursday. Prior to the US data beats on the PMI side, USD/CNH lows were just under 7.2500. We rallied close to 7.2590 as the US session unfolded and track near 7.2575 in early Friday dealings. CNH's loss on Thursday was very modest, while USD/CNY spot ended up at 7.2430, not too far from late April highs (on a closing basis).

  • The scene is set for another rise in the USD/CNY fixing, which edged higher yesterday close to 7.1100. This was highs back to January, but onshore and offshore spot moves remained well contained.
  • The firmer US yield backdrop is pushing US-CH 2yr yield differentials back close to late April cyclical highs (last +313bps). The 2yr CGB yield is threatening a break sub 1.80%, which has marked recent lows.
  • Onshore media also urged local investors to be cautious around speculative trades in the recent ultra-long bond issuance (per BBG). President Xi also called for deeper reforms in parts of the economy, including property (see this link for more details).
  • To recap, onshore equities finished down over 1% in terms of the CSI 300. The May consolidation in onshore equities continues. The Golden Dragon index was down 3.71% in Thursday US trade, the fourth consecutive loss.
  • On the data calendar, we have April industrial profits on Monday.
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The uptrend in USD/CNH remained intact on Thursday. Prior to the US data beats on the PMI side, USD/CNH lows were just under 7.2500. We rallied close to 7.2590 as the US session unfolded and track near 7.2575 in early Friday dealings. CNH's loss on Thursday was very modest, while USD/CNY spot ended up at 7.2430, not too far from late April highs (on a closing basis).

  • The scene is set for another rise in the USD/CNY fixing, which edged higher yesterday close to 7.1100. This was highs back to January, but onshore and offshore spot moves remained well contained.
  • The firmer US yield backdrop is pushing US-CH 2yr yield differentials back close to late April cyclical highs (last +313bps). The 2yr CGB yield is threatening a break sub 1.80%, which has marked recent lows.
  • Onshore media also urged local investors to be cautious around speculative trades in the recent ultra-long bond issuance (per BBG). President Xi also called for deeper reforms in parts of the economy, including property (see this link for more details).
  • To recap, onshore equities finished down over 1% in terms of the CSI 300. The May consolidation in onshore equities continues. The Golden Dragon index was down 3.71% in Thursday US trade, the fourth consecutive loss.
  • On the data calendar, we have April industrial profits on Monday.