USDCNH traded flat yesterday at the......>

CHINA YUAN: USDCNH traded flat yesterday at the top end of its recent range,

with the pair on the front foot this morning at 6.8724 ahead of the PBOC fix.

Yesterday's firmer than expected CPI reading for August (which came in at 2.3%

y/y up from 2.15 in July) failed to provide any support to the yuan.

- 2-year swap rate differentials between China and the US have remained stable

over recent trading with both markets edging higher. The spread currently sits

at 4.5bps.

- The 21-day rolling correlation between 2-year rates and CNHUSD fell to 0.50

yesterday, with the drop reflecting the impact of higher US rates which are

undermining China's yield advantage. The 21-day rolling correlation between

CNHUSD and the CSI300 rose to 0.18.

- The yuan continues to trade more in line with DM FX than EM FX, with the

21-day correlation between USDCNH and the DXY at 0.65 and the correlation

between USDCNH and the MSCI EM currency index at just 0.40.