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CNH: USD/CNH Back Sub 7.3500 on Tariff Headlines, CNY Basket Up

CNH
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USD/CNH is tracking near 7.3435 in early Tuesday dealings. CNH rose a little over 0.20% for Monday's session, outperforming broader USD index trends, which were close to unchanged. Spot USD/CNY remained very steady, closing at 7.3320. The CNY CFETS basket tracker firmed by a little over 0.20% to finish Monday trade at 101.65 (per BBG), but this is still under recent highs. 

  • CNH received support from the raft of PBoC comments and actions. Emphasis on maintaining a stable yuan and preventing FX overshooting were key highlights. Raising the amount institutions can borrow offshore is also seen as a positive, but is unlikely to alter the yuan trend.
  • CNH sensitivity to the US tariff outlook has been on display this morning, with support coming through after BBG reported that the incoming Trump administration was considering a gradual tariff hike plan, although Trump hasn't agreed to this proposal. USD/CNH dipped from above 7.3500 to current levels as the headlines crossed.
  • Any further USD/CNH pull back may bring the 20-day EMA support zone into play, which rests near 7.3270. US-CH yield differentials are mixed, with the 10-yr spread elevated, but 2yr differential off recent highs.
  • The China securities regulator vowed to stabilize the market following the poor start to major equity indices since the start of the year (see this BBG link).
  • The local data calendar is empty today, but we still await new loans/aggregate finance figures for Dec.   
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USD/CNH is tracking near 7.3435 in early Tuesday dealings. CNH rose a little over 0.20% for Monday's session, outperforming broader USD index trends, which were close to unchanged. Spot USD/CNY remained very steady, closing at 7.3320. The CNY CFETS basket tracker firmed by a little over 0.20% to finish Monday trade at 101.65 (per BBG), but this is still under recent highs. 

  • CNH received support from the raft of PBoC comments and actions. Emphasis on maintaining a stable yuan and preventing FX overshooting were key highlights. Raising the amount institutions can borrow offshore is also seen as a positive, but is unlikely to alter the yuan trend.
  • CNH sensitivity to the US tariff outlook has been on display this morning, with support coming through after BBG reported that the incoming Trump administration was considering a gradual tariff hike plan, although Trump hasn't agreed to this proposal. USD/CNH dipped from above 7.3500 to current levels as the headlines crossed.
  • Any further USD/CNH pull back may bring the 20-day EMA support zone into play, which rests near 7.3270. US-CH yield differentials are mixed, with the 10-yr spread elevated, but 2yr differential off recent highs.
  • The China securities regulator vowed to stabilize the market following the poor start to major equity indices since the start of the year (see this BBG link).
  • The local data calendar is empty today, but we still await new loans/aggregate finance figures for Dec.