USD/CNH Touches 6.9100 Before Retracing, LPRs Expected To Remain On Hold

USD/CNH got to fresh highs post the Aisa close on Wednesday. The pair got to the 6.9100 handle, just below late March highs, before pulling back. CNH lost 0.18% for the session. We currently track around the 6.8950 region, little changed in early trading, despite a supportive USD backdrop against the majors. The CNY NEER was flat at 125.28 for Wednesday (J.P. Morgan Index).

• Coming up today is the 5yr and 1yr LPR outcomes. No change is expected in either rate (5yr currently at 4.30%, 1yr at 3.65%).
• Like other pairs, USD/CNH is being biased higher by the firmer US yield backdrop, although it's beta with respect to the moves is not as strong as it was in 2022.
• Still, intra-day moves with dollar indices remains fairly strong for USD/CNH.
• 1 month USD/CNH implied vol has edged a little higher, but is not too far off recent lows sub 5% (last 5.22%). The 1 month risk reversal has also firmed a touch, last at 0.625.
• Note in the US on Thursday, US Treasurer Secretary Yellen will deliver a speech on US-China economic ties.