USD/CNH Sticky Around 7.30, Off Session Highs As Broader USD Eases A Little

USD/CNH ticks away from the CNH7.31 area to show as low as 7.2951 in recent trade.

• This seems to be a function of the broader risk backdrop and the related USD downtick.
• USD/CNH remains incredibly sticky around the CNH7.30 mark.
• Indeed, 1-, 3- & 12-month implied vol. measures sit a little above recently registered multi-month/year-to-date lows.
• Vol. dynamics are being impacted by the PBoC’s lean against runaway CNY devaluation (via the daily mid-point fixing and various back-channel methods in recent months) meeting/largely offsetting well-documented headwinds/pessimism surrounding the Chinese economy and capital outflows from China.
• Realised vol. is dragging implied vol. as a result.
• The lack of volatility in the rate and move back from multi-week lows leaves well-defined technical parameters in play for USD/CNH, as we have covered on numerous occasions.
• Another day of light outflows from mainland equities via the HK-China Stock Connect links would have provided some background headwinds for CNH.
• Monthly economic activity data, PBoC MLF operations and Wednesday’s Biden-Xi summit present the China-centric points of interest in the coming days.
• On the latter/Sino-U.S. relations, a reminder that Asia-Pac hours saw headlines note China may unveil a Boeing order this week, showing a further potential thawing in US-China tensions.