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CNY Fixing Still Biased Firmer

CNH

The CNY fix was again firmer than expected. The market consensus was 6.6588, versus the actual print of 6.6550.

  • Today's fix saw a step up in terms of the bias. We printed at -38pips in USD/CNY terms for the fixing surprise. This follows yesterday's downside surprise of -8pips. This brings the week to date cumulative bias to -71pips.
  • The rolling 5 day sum of the fixing error term is now -92pips, so a modest lean against depreciation pressures. Note last Friday this rolling 5 day sum was back to -11pips.
  • USD/CNH slipped post the fix, moving from the high 6.66 region but there hasn't been a great deal of follow through. USD/CNH is back close to 6.6700 now.
  • Besides broader USD sentiment, the focus will be on US tariff deliberations, with Biden now travelling back to the US after his North Asia trip.
  • US Trade Representative Katherine Tai stated the US must be strategic around the tariff decision and any decision needs to be viewed in terms of realigning the US-China trade and economic relationship.
  • Such a comment arguably reduces the odds of tariffs coming down, although clearly Biden/Yellen will also be focused on the domestic inflation issue in the US.
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