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USD/CNH Back To 6.9700 Handle

CNH

After getting to within 20pips of 7.00 overnight, USD/CNH retraced all the way back to just under 6.9600. The early tone is higher in the pair, in line with sentiment in the G10 space. We were last around 6.9700 (+0.15% versus NY close).

  • Domestic Covid headwinds continue. Case numbers in Beijing and Shanghai continue at a double digit pace, while the lockdown for Chengdu was extended. Shenzhen will also temporarily reduce the entry quote on travellers from Hong Kong.
  • China equities performance is also starting to wane relative the rest of the world.
  • There also seems little prospect of near-term relief on the tariff front with the US (see this link for more details), although this hasn't been a key driver of sentiment in recent months.
  • To recap, China's FX reserves fell sharply in August, down to $3054.8bn from $3104bn in July. The China authorities noted much of the drop was due to valuation effects.
  • There is no data out today, with inflation figures due tomorrow. This leaves the CNY fixing in focus, following yesterday’s record surprise relative to market expectations.
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