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CNY
Onshore trading volumes for USD/CNY have been drifting lower since the start of this month, providing another sign of some calmness returning to China currency markets. This trend fits with lower implied volatility and risk reversal levels seen for USD/CNH.
- The chart below plots onshore USD/CNY trading volumes against spot USD/CNY.
- Trading volumes had been trending lower from mid March of this year but surged from mid April as onshore spot broke above 6.4000.
- The relationship between USD/CNY and trading volumes was particularly strong in 2015, 2016 and 2018. Generally higher volumes were associated with higher USD/CNY levels. This likely reflected increased capital outflow pressures on days of higher trading volume.
- The link is not as strong in recent years, with China largely having closed borders with the rest of the world during the Covid pandemic, which has closed off one source of capital outflow pressure via sharply lower outbound tourism flows. The authorities have also increased capital flow surveillance measures, particularly since the 2015/16 period.
- Still, we have seen episodes where trading volumes rise when USD/CNY has been rallying and the past month has proven no different.
- Yesterday, though, provided the lowest for onshore spot trading volumes since April 18th.
Fig 1: USD/CNY Spot & Onshore USD/CNY Trading Volumes
Source: MNI - Market News/Bloomberg
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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