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Yuan Continuing To Underperform USD Softness

CNH

USD/CNH is holding close to unchanged in recent dealings, last in the 7.1630/40 region. This is again underperforming a softer USD trend against the majors, most notably the yen. the BBDXY has slipped back towards 1220.

  • USD/CNH and USD/JPY have enjoyed a tight correlation over the past 12 months (see the chart below). Whilst this will reflect broader USD trends, there are some monetary policy similarities as well, given divergences from the PBoC and the BOJ compared to other major Central Banks over this period.
  • Still, the divergence between CNH and JPY is only modest at this stage.
  • China related equities are higher, although the bounce is more modest compared to elsewhere in the Asia Pac region so far today.

Fig 1: USD/CNH & USD/JPY Spot Trends

Source: MNI - Market News/Bloomberg

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