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CNH: USD/CNH Near 7.3600, Onshore Spot Breaks Above 7.3000

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USD/CNH traded with an upside bias on Friday, testing above 7.3600, although fell short of end 2024 highs of 7.3695. We track close to 7.3600 in early Monday dealings. CNH was close to unchanged for Friday's session. Spot USD/CNY broke above 7.3000, finishing up above 7.3200. This is fresh highs in onshore spot back to 2023. This move helped USD/CNH push higher. The CNY CFETS basket tracker tracked higher though, now above 102.00, fresh highs since 2022. 

  • 2022 highs for USD/CNH, just under 7.3750, are within striking distance. The 20-day EMA is back near 7.3100 on the downside.
  • The combination of further policy easing steps from China, with the PBoC reiterating late last week that RRR and interest rate cuts would be delivered at the appropriate time. along with US resilience continues to drive higher US-CH yield differentials. The 10yr spread is close to +300bps.
  • Focus today will also be on the USD/CNY fixing, given Friday's spot break higher in USD/CNY. Some offset came from lower USD index levels though. Friday's fixing implied a 7.3316 cap for USD/CNY spot. The fixing has remained sub 7.2000 during this recent cycle move higher in USD/CNH.
  • Local equities have started the year softly, the CSI 300 back sub 3800 at the end of last week. An expansion of the consumer trade in program didn't lift sentiment materially in this space.
  • Locally today we have the Caixin services PMI for Dec. The market expects a 51.4 outcome (prior was 51.5). The official services PMI was better than forecast but detail suggested softer inflation outcomes (note the Dec prints on Thursday). 
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USD/CNH traded with an upside bias on Friday, testing above 7.3600, although fell short of end 2024 highs of 7.3695. We track close to 7.3600 in early Monday dealings. CNH was close to unchanged for Friday's session. Spot USD/CNY broke above 7.3000, finishing up above 7.3200. This is fresh highs in onshore spot back to 2023. This move helped USD/CNH push higher. The CNY CFETS basket tracker tracked higher though, now above 102.00, fresh highs since 2022. 

  • 2022 highs for USD/CNH, just under 7.3750, are within striking distance. The 20-day EMA is back near 7.3100 on the downside.
  • The combination of further policy easing steps from China, with the PBoC reiterating late last week that RRR and interest rate cuts would be delivered at the appropriate time. along with US resilience continues to drive higher US-CH yield differentials. The 10yr spread is close to +300bps.
  • Focus today will also be on the USD/CNY fixing, given Friday's spot break higher in USD/CNY. Some offset came from lower USD index levels though. Friday's fixing implied a 7.3316 cap for USD/CNY spot. The fixing has remained sub 7.2000 during this recent cycle move higher in USD/CNH.
  • Local equities have started the year softly, the CSI 300 back sub 3800 at the end of last week. An expansion of the consumer trade in program didn't lift sentiment materially in this space.
  • Locally today we have the Caixin services PMI for Dec. The market expects a 51.4 outcome (prior was 51.5). The official services PMI was better than forecast but detail suggested softer inflation outcomes (note the Dec prints on Thursday).