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USD/CNH Respects Recent Ranges, CPI/PPI On Tap Today


(MNI Australia) USD/CNH respected this week's ranges post the Asia close. We got to a low around 6.7760, but were back around 6.7960/70 towards the end of the NY session. We currently track slightly lower, 6.7930/35. CNH was close to unchanged for Thursday's session, as was the CNY NEER, last around 126.21 (J.P Morgan index).

  • Like elsewhere, USD/CNH recovered amid a broad move higher in US yields through NY trade. The chart below overlays USD/CNH against the US-CH 2yr government bond yield spread.
  • The two series are still tracking each other from a directional standpoint, albeit with USD/CNH too low relative to current spreads. Some of the wedge likely reflects optimism around the China shift away from CVS and improved growth prospects this year.
  • The focus today will be on China CPI and PPI prints for Jan. See this link for more details. CPI trends are likely to be watched closely, particularly given some forecasters are still calling for easier monetary policy settings from China in the first half of this year.
  • In the equity space, the China Dragon Index rose 1.10% in US trade, after firm gains in onshore shares yesterday (CSI 300 +1.34%). Northbound stock connect flows were firm at +12.1bn yuan, the first day of inflows in a week.

Fig 1: USD/CNH Versus US-CH 2yr Spread (Government Bond Yields)

Source: MNI - Market News/Bloomberg

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