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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.
CNH
USD/CNH got close to 6.8800 overnight, largely following broader USD gyrations post the Asia close. The CNH remains an outperformer against EUR. EUR/CNH is back to 6.8250, eyeing a test sub 6.8000, which was lows from mid July. Against the rest of the majors, CNH was mid-range in terms of relative performance against the USD. CNH/JPY is above 20.00 but can't break above the 50 day MA (20.11).
- For USD/CNH, the drift higher in yield differentials continues to underscore the policy divergences with the US, which should tilt the risks higher for the pair.
- The onshore Securities Journal states the RRR may be lowered to offset MLF maturities before year end. This would then bias LPRs down further.
- Option markets continue to suggest a sense of calm around the pace of depreciation, even as USD/CNH prints fresh multi-year highs.
- China equities are starting to outperform to rest of the world again, see the chart below. China stocks pushed higher yesterday, aided by the lower LPR rates and efforts to boost liquidity to the property sector, with potentially as much as 200bn yuan in support from state owned banks, according to a report from late last week.
- Of course, renewed weakness in the global equity backdrop is aiding relative China outperformance. At the margin this should help CNY NEER.
- The domestic data calendar is quiet today.
Fig 1: China Equity Ratio & CNY NEER
Source: J.P. Morgan/MNI/Market News/Bloomberg
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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