Free Trial

USD/CNH Plunges Towards 7.2000 Before Rebounding, US-CH Spreads Still Elevated

CNH

USD/CNH tracks near 7.2400 in early Friday dealings. Intra-session lows from Thursday reached 7.2032, as the CNH enjoyed spill over from yen gains and as investors unwound carry trade positions (with CNH a funding vehicle for such trades). USD/CNY finished up at 7.2469.

  • CNH posted a 0.36% gain for Thursday's session after Wednesday's +0.31% rally. This comes despite fresh easing measures this week in the rates space, with the latest yesterday's 20bps cut in the 1yr MLF (the largest since the 2020 Covid pandemic).
  • Bloomberg notes heavy onshore USD selling volumes from yesterday, which coincided with the sharp pull back in USD/JPY. State banks were reportedly also USD sellers.
  • The rebound in USD/CNH was aided by better Q2 US growth numbers, which helped stabilize front end US Tsy yields. US-CH yield differentials have held up this week, aided by China easing efforts, creating a modest divergence with USD/CNH, although it isn't large from an historical standpoint.
  • Local equity sentiment remains on the backfoot, the CSI 300 closing under 3400 yesterday (down 0.55%). The Golden Dragon index also fell in Thursday US trade (-0.68%).

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.