USD/CNH Testing 6.7000, Onshore Spot Helping Sentiment

USD/CNH briefly touched sub 6.7000, (6.6999 low per Bloomberg). This weakness coincided with the onshore open, which also was below 6.7000. Support has emerged since then with USD/CNH pushing back up through 6.7100, but there hasn't been a great deal of follow through. Onshore spots move back above 6.7000 has also drawn selling interest. USD/CNY remains sub USD/CNH spot.

• China currency bulls were likely encouraged by the benign fixing outcome (relative to expectations), which isn't pushing back aggressively against appreciation pressures. The unchanged 1 MLF rate also likely helped at the margins, as there were some forecasters looking for a 10bps cut.
• The China currency also tends to do well ahead of the LNY period, with potential repatriation of export earnings a driver.
• This later point may be why CNY has been leading the move, compared to CNH, over the past week.
• Early July 2022 lows in USD/CNH came in close to 6.6800, while beyond that is the 6.6600 region.