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Yuan Erases Earlier Gains After Weaker Fix; Ignores Data

CNH

Data from China showed industrial production rose 7.0% in November, in line with forecasts and slightly higher than the 6.9% rise in October. Retail sales also rose in line with estimates at 5.0% compared to a 4.3% rise in October.

  • Property investment rose 0.1ppt above forecasts at 6.8%, while the surveyed jobless rate at 5.2% was in line with estimates.
  • In the wake of the release China said challenges still remain for an economic recovery.
  • USD/CNH has ignored the decent data, the pair is last at 6.5378 after erasing its earlier move lower in the wake of a weaker fix for the yuan. This was the first weaker fix since Thursday last week.
  • Citigroup analysts believe USD/CNH can touch 6.00 in 2021, adducing a flood of foreign cash due to positive carry they believe will chase yuan higher. CICC, however, hold the opposite view and see the yuan retreating as nations around the world get a grip on the pandemic.
  • The move higher in the pair has pushed 1 month volatility to 5.26, the third straight day of increases for volatility.
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