Weakens Close to 7.2500, USD/CNY Near 7.2200, As Headlines On Intervention Cross

USD/CNH sits near 7.2475 in recent dealings, below session highs (7.2496). Not surprisingly, implied vols have spiked higher following the break higher this morning. The 1 month is back +3.6%, which is up from recent lows close to 2.50%. We are still some distance from early Jan highs, close to 6%. 1 month risk reversals have also spiked.

• Nov 17 highs in USD/CNH came in close to 7.2700, beyond that lies the 7.3000 handle. USD/CNH weakness is following on from the onshore break above 7.2000.
• Headlines have cross in recent dealings that state banks are selling USD to support the yuan. USD/CNY spot broke above 7.2000 earlier for this the first time this year. This level had held as a resistance point for some time. We have since risen to highs of 7.2220/25. So far, the reported intervention hasn't seen the yuan reboundmuch.
• In the cross-asset space, weakness in HK/China equities are not helping FX sentiment. Earnings weakness and concerns around fresh US regulations are headwinds at this stage.
• The break higher in USD/CNH also puts it more into line with US-CH yield differentials. Recall, recent comments this week around scope for lower RRR levels, which is likely aiding market sentiment potential for easier policy settings.