USD/CNH Holding Above 7.1800 Amid US Yield Rebound, July Inflation Out Today

USD/CNH sits near 7.1830 in early Friday dealings. We couldn't breach 7.1850 through Thursday trade, but dips to 7.1550 were supported. The pair moved higher, in line with USD/JPY gains, post the slightly better than expected initial jobless claims (IJC) print in US trade. CNH lost 0.15% for Thursday's session, its third straight decline. USD/CNY finished up at 7.1763.

• We saw a continued recover in US yields (post the IJC print), with the 10yr back to 3.99%, around levels that prevailed prior to last week's NFP print. This weighed on low yielders/safe haven FX, which crimped CNH. US-CH yields differentials have now based somewhat.
• For USD/CNH Wednesday highs at 7.1945 remain intact. Tuesday lows were at 7.1337.
• Focus will likely rest on the USD/CNY fixing today, with yesterday's move to 7.1460, the highest level the highest since Nov 2023, which helped put a base in USD/CNH yesterday. It signals a likely desire to limit yuan appreciation trends both against the USD and on a CNY basket basis.
• The other focus point will be today's July inflation data. The market expects 0.3% y/y for headline CPI, versus 0.2% prior. PPI is projected at -0.9% y/y (-0.8% was recorded in June).
• In the cross asset space we saw a decent rise in local CGB yields yesterday, 10yr back to 2.17%, as the authorities intensified efforts to curb the recent move lower in yields. China equities have largely tracked sideways in recent sessions.