USDCNH has risen slightly following the.......>

CHINA: USDCNH has risen slightly following the PBOC fix, with the pair trading

at 6.8682, remaining well within its range. EURCNH is holding support at 8.0

after giving back some of its breakout gains yesterday.

- Yesterday's impressive equity market gains provide support for the yuan as

they suggest upside pressure on interest rates will remain and point to some

stability in the Chinese economy. The 21-day rolling correlation between the

CSI300 and CNHUSD sits at a solid 0.59 and we expect this positive correlation

to remain intact.

- 2-year interest rate swaps are up 1bps today following yesterday's rise, and

after holding both the 21 and 55-dmas yesterday the recovery is intact. The

21-day rolling correlation between 2-year swaps and CNHUSD has fallen back to

-0.27, as the relentless rise in US yields prevents the rally in Chinese yields

from benefitting the yuan.