USDCNH remains on the front foot ahead...>

CHINA YUAN: USDCNH remains on the front foot ahead of the PBOC fix, trading at

6.8807, with the August 24 peak at 6.8955 the next level of resistance for the

pair. A break above here would suggest a retest of the August 15 high of 6.9586

and put the question of intervention back on the table. 

- The yuan's weakness yesterday came despite a large rise in Chinese rates, with

the 2 year breaking to the upside to touch 3.0% at one point before settling at

2.97%. Rising US yields kept the China-US spread at minimal levels, with the

spread currently at 3.8bps. 

- This has seen the 21-day rolling correlation between CNHUSD and Chinese 2-year

swaps fall to 0.27. The CNHUSD-CSI300 correlation rose back to 0.35 following

the decline in both markets.