Yuan Defies Stronger Greenback

Offshore yuan is flat in early trade after defying a stronger greenback on Wednesday to finish the day with small gains.

• The market is still latching on to reports from yesterday that the RRR could be cut after reports from the State Council meeting. There is growing speculation that the cut will be targeted rather than a cut to the broader RRR, a story just run in the China Securities Journal posited that the cut is more likely to be for SME. The piece asserts that the cut could come at the end of Q3 if upward pressure on CPI eases.
• Elsewhere data yesterday showed China's FX reserves fell for the first time three-months to $3.214tn from $3.222tn in May. In a statement China's SAFE said "The economy is operating in a stable manner with more strength and improvement, and its internal drivers are strengthening, which will help keep the size of reserves stable."
• Meanwhile Didi Global are still in the headlines after falling for a third consecutive day yesterday. Regulators are said to be considering rule changes that would allow them to block a Chinese company from listing overseas even if the unit to which the shares belong is incorporated.
• There are no domestic releases on the docket today, participants will look ahead to inflation figures on Friday.