Free Trial
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
CHINA
- USDCNY has been trending lower in the past week after finding resistance at its 50DMA in the first half of February following the ‘sharp’ depreciation in the end of January.
- As a reminder, CNY has been 'qualified' as a 'risk-on' currency, which tends to depreciate ‘strongly’ in periods of market uncertainty and rising volatility, and gradually appreciate when risk-aversion is falling.
- The bottom chart shows the performance of CNY for different magnitude of VIX moves, looking at daily data since January 2010.
- Hence, as geopolitical tensions have been ‘easing’ in recent days, preference for the ‘safe’ USD has decreased and bearish momentum on USDCNY has resumed (uncertainty is still elevated, therefore market environment can change drastically in ST).
- In addition, we have previously seen that central banks' balance sheet asset differential has also been an important driver of currencies in the past 10 years.
- While the PBoC balance sheet has been nearly ‘unchanged’ since the start of the pandemic, the Fed balance sheet more than double to 8.86tr USD and continues to gradually increase, leading to further downward retracement on USDCNY (top chart).
- ST support to watch on USDCNY stands at 6.32 (Jan 26 low); a break below that level would open the door for a move down to 6.30 (April 2018 lows).
Source: Bloomberg/MNI
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
We are facing technical issues, please contact our team.
ok
Your request was sent sucessfully! Our team will contact you soon.
ok