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USD/CNY Spot Can't Break Above 7.2000, CNH Aided By US Yield Pullback

CNH

USD/CNH breached the 7.220 handle late in Asia Pac trade on Wednesday. This was fresh highs in the pair back to mid Feb, but we start Thursday trade back near 7.2140. The modest CNH turnaround was aided in US trade by lower US yields. USD/CNY finished up at 7.1980 on Wednesday, still unable to breach the 7.2000 handle. The CNY NEER (J.P. Morgan index) firmed by 0.19% to 124.63, which is still below recent highs.

  • For USD/CNY spot, 7.2000 remains a clear line in the sand from a near term standpoint. BBG notes that state owned banks were constant USD sellers ahead of this level yesterday. The pair hasn't been above this level since Mid-Nov last year.
  • This may limit USD/CNH upside to extent the CNH-CNY basis often tops out in the +200-400pip range. We currently sit at +165pips.
  • The local data calendar remains empty until tomorrow's PMI prints.
  • In the equity space, the Golden Dragon index fell 1.66% in US trade, the first fall in 6 sessions. To recap, onshore equities were down in Wednesday trade (CSI 300 off 1.27%), as regulators vowed to gradually reduce a quantitative trading strategy (see this BBG link).
  • China Premier Li Qiang met with US representatives from the Chamber of Commerce in Beijing yesterday. He stated that China welcomes US investment and looks to deepen economic ties between the two countries (see this link).
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