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Yuan Bid Heading Into Month-End

CNH

The yuan is higher, offshore yuan gaining sharply as the onshore yuan rose on month-end flows. USD/CNH fell throughout the session, helped lower by improved risk sentiment as shares rebounded on US earnings reports and stimulus talks. The pair tested 6.4688 twice but failed to breach the level. Last down 28 pips at 6.4715.

  • Markets look ahead to the PBOC's liquidity operations today, the bank yesterday drained CNY 150bn, the biggest single day drain since October, even as repo rates spike to recent highs ahead of LNY. The total drain this week is just above CNY 325bn. The bank has been keen to emphasise that this is not a tacit tightening move, the PBOC said it won't rush to reduce economic support and is cognisant of risks to the recovery and the financial system.
  • A piece in the China Financial News (published by the PBOC) today has said that bank could inject liquidity to meet demand ahead of LNY, citing Bank of China researcher Li Yiju. The piece notes that with travel discouraged this year liquidity needs are lower.

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