Weak PBOC Fix Takes Toll On Redback, Greenback Gains Across Board

Spot USD/CNH shot higher after the PBOC set the USD/CNY mid-point at the highest level since 2008, which has spilled over into the broader FX space. The fixing rate printed 530 pips below sell-side estimate, the narrowest error in four days.

• The fixing erased earlier losses in USD/CNH driven by the PBOC's decision to raise the cross-border funding macro-prudential parameter, which effectively promotes cross-border inflows.
• Spot USD/CNH is flirting with the CNH7.35 mark after lodging a fresh record high at CNH7.3686 as a result of a 0.9% trough-to-peak swing.
• The BBDXY index bounced off session lows and last operates just shy of neutral levels, even as U.S. Tsy yields remain lower across the curve.
• Spot USD/KRW moved in tandem with USD/CNH, ticking away from session lows. The rate earlier printed its best levels since 2009.
• The Antipodeans have trimmed their earlier gains versus the greenback after the PBOC fix as we await the Australian budget speech this evening.
• Sterling remains the best G10 performer, albeit cable has eased off highs. The pound has benefitted from the stabilisation of UK political situation after Rishi Sunak won the race to become the next UK Prime Minister.
• After Asia hours, focus will turn to German IFO survey, U.S. Conf. Board Consumer Confidence, as well as ECB's Centeno, Fed's Waller & BoE's Pill.