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USD/CNH Slumps On Intervention Risk, PMIs On Tap Today

CNH

USD/CNH faltered above 7.2100 late yesterday. We fell sharply to 7.1500 on a Reuters report that state banks were asked to prepare to sell dollars in offshore markets. Through the NY session the pair dipped further, aided by EUR and GBP strength against the USD. We now sit under 7.1000. On tap today is the September PMI prints.

  • According to the Reuters report this round of intervention could be large. The authorities perhaps have one eye on next week, when onshore markets are closed (hence there will be no USD/CNY anchor point for the CNH market).
  • There certainly appears to resistance to USD/CNH (and USD/CNY) weakening much beyond 7.2000 in the near term. The intervention warning overnight comes after the hike in the forward reserve requirement and reintroduction of the counter cyclical factor in the CNY fixing this week.
  • Spot USD/CNY ended the onshore session at 7.1249 (the 4:30pm level was much higher though at 7.2000).
  • Today's domestic data focuses on the PMI prints for September, see this note for more details. The market expects a further modest improvement in manufacturing (49.7 from 49.4), but a slip in services (52.4 from 52.6).
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