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USD/CNH Off Monday Highs, Aided By Broader USD Softness

CNH

USD/CNH tracks around 7.2835 in early Tuesday dealings. Monday intra-session lows were recorded around 7.2770, against earlier highs close to 7.2950. CNH recorded a modest 0.10% gain against the USD for Monday's session, aided by broader softness in the USD indices (BBDXY fell nearly 0.30%). Onshore USD/CNY spot finished up at 7.2594, sub intra session highs near 7.2620.

  • Monday highs in USD/CNY spot came close to the upper daily trading limit (7.2625, which is +2% above yesterday's fixing level of 7.1201).
  • We may see some reprieve today in terms of the fixing, given softer USD trends from Monday, although market focus is likely to remain with continued yuan depreciation pressures. Bloomberg notes that some short term FX transactions are being impacted given onshore spot is close to the upper daily trading limit.
  • For USD/CNH the 20-day EMA sits back near 7.2700 on the downside. Barclays notes that dividend outflows from Hong Kong by China companies this week will keep pressure on CNH (per Bloomberg).
  • The local data calendar is quiet until Thursday's May industrial profits data prints.
  • Local equity sentiment remained negative yesterday, the CSI 300 finished down just over 0.50%, the Shanghai Composite off 1.17%. The Golden Dragon index rose 1.30% though in US trade.

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