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(M2) Correction Extends


Late Session Rebound


(M2) Corrective Cycle Remains In Play

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Spot USD/CNH has oscillated within a very tight range thus far, looking through the headline flow summarised below. The PBOC delivered another in-line yuan fixing, providing no material impetus for the redback. The rate last changes hands at CNH6.3474, virtually unchanged on the day.

  • Bears need losses past Jan 18/Dec 31 lows of CNH6.3405/6.3379 before setting their sights on Dec 8 low of CNH6.3305. Conversely, bulls need a rally above Jan 6/Nov 26 highs of CNH6.3976/99 to regain poise.
  • SAFE's spokeswoman Wang told a press briefing that knock-on effects from the Fed's policy tightening may be smaller than previously, as she forecast more stable cross-border capital flows in 2022. Wang attributed the recent uptick in the yuan to seasonal factors, adding that robust exports are the main supporting factor for domestic currency.
  • The PBOC are expected to continue push latest round of policy easing further. Sources told Reuters that the central bank will cut interest rates applied to its SLF loans across overnight, 7-day and 1-month maturities by 10bp each. Elsewhere, Bloomberg circulated the results of their survey of analysts, which suggested that the PBOC are expected to lower the RRR in Q1 and further reduce other major policy rates in Q2.
  • There is little of note on the Chinese docket next week, with Thursday's industrial profits providing the sole point of note ahead of the LNY holidays.
MNI London Bureau | +44 203-865-3806 |
MNI London Bureau | +44 203-865-3806 |

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