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CNH Outperforming Higher US Yields, Onshore Markets Closed Today


USD/CNH is back down sub 6.9300 this morning, in line with the softer tone for the USD against the majors. We got below 6.9300 on Friday, before closing just under 6.9400. China and Hong Kong markets are closed today, so there will be no USD/CNY fixing.

  • To recap, late on Friday August aggregate finance data printed. We saw a slightly better than expected outcome (2430bn yuan versus 2075bn expected), but new loans were slightly weaker 1250bn, against a 1500bn forecast. YoY momentum in aggregate finance was slightly softer compared to July.
  • This week, the MLF decision is due between Tuesday and Friday. No change is expected at this stage (1yr rate at 2.75%), while on Friday a host of activity prints are due for August (IP, retail sales, FAI).
  • Calls for easier policy settings will likely continue post Friday's weaker inflation data.
  • CNH is outperforming the continued trend higher in US yields, see the chart below. It may be that the pair tracks broader USD trends today, with onshore markets out.
  • Elsewhere, the focus will be on the domestic Covid situation. Aggregate case numbers continue to trend down, although a number of flare ups in Beijing will needed to be monitored.
  • Headlines also crossed this morning that US President Biden plans to broaden curbs around US exports of chips to China next month. This shouldn't come as a surprise though with fresh restrictions being discussed last week.

Fig 1: USD/CNH & US-CH 2yr Government Bond Yield Spread

Source: MNI - Market News/Bloomberg

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