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CNH: USD/CNH Up From Lows, Implied Yields Elevated But Unlikely To Shift Trend

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USD/CNH saw earlier lows of 7.3437, but we sit slightly higher now, last near 7.3480. This is a touch firmer for the session in NCH terms, but gains are less than 0.10% at this stage. Earlier highs in the pair were marked at 7.3573. 

  • Overall USD/CNH remains comfortably within recent ranges. Earlier lows this week (7.3132), on tariff headlines, remain some distance away. The 20-day EMA support point is close to 7.3170.
  • The steady fixing bias, which is capping USD/CNY upside above 7.3300, will act as a constraint on USD/CNH upside in the near term. The record Hong Kong yuan bill issuance, set at 60bn yuan for the middle of this month, should tighten offshore liquidity or keep it tight, all else equal. CNH implied yields remain elevated. 1wk tenor 4.42%, 1 month 3.95%, 3.3%, 6 month 2.79%, 2.30%, compared to recent history.
  • Still, such a backdrop is unlikely to be a trend shifter for USD/CNH, given still elevated US-CH bond yield differentials and the looming tariff threat from the Trump administration.
  • China bond yields are a little higher post the earlier inflation data, which showed further improvement in core inflation, but yield rises are only modest at this stage. 
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USD/CNH saw earlier lows of 7.3437, but we sit slightly higher now, last near 7.3480. This is a touch firmer for the session in NCH terms, but gains are less than 0.10% at this stage. Earlier highs in the pair were marked at 7.3573. 

  • Overall USD/CNH remains comfortably within recent ranges. Earlier lows this week (7.3132), on tariff headlines, remain some distance away. The 20-day EMA support point is close to 7.3170.
  • The steady fixing bias, which is capping USD/CNY upside above 7.3300, will act as a constraint on USD/CNH upside in the near term. The record Hong Kong yuan bill issuance, set at 60bn yuan for the middle of this month, should tighten offshore liquidity or keep it tight, all else equal. CNH implied yields remain elevated. 1wk tenor 4.42%, 1 month 3.95%, 3.3%, 6 month 2.79%, 2.30%, compared to recent history.
  • Still, such a backdrop is unlikely to be a trend shifter for USD/CNH, given still elevated US-CH bond yield differentials and the looming tariff threat from the Trump administration.
  • China bond yields are a little higher post the earlier inflation data, which showed further improvement in core inflation, but yield rises are only modest at this stage.