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USD/CNH Breaks Through 6.8200

CNH

In quick order USD/CNH has broken through 6.8200, above earlier week to date highs from Monday, when the surprise MLF cut was delivered, and July activity prints were weaker than expected. The catalyst for the move appears to be the slightly weaker than expected CNY fixing, although the miss was fairly modest. The pair touched a high just above 6.8270, we are now back to 6.8250/60. The next focus point will the mid May YTD highs of 6.8380, Interestingly, the vol space remains relatively calm for now. To be sure, we are up off recent lows, but remain well below previous highs. This disconnect between spot and 1 month implied vol levels has been apparent for a number of months. Sentiment may change if we break to fresh YTD highs for the year on a spot basis.


Fig 1: USD/CNH & 1 Month Implied Vols

Source: MNI/Market News/Bloomberg

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