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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
CNH
MNI (Australia) Yuan vol continues to fall sharply. USD/CNH 1 month implied is fast approaching early 2022 lows, last near 3.51%, see the chart below. USD/CNH tried to track lower in the first part of trade today but couldn't get sub 7.3220, we last tracked near 7.3290. Onshore spot has had even less volatility. It's implied 1 month vol is the other line (white) on the chart below.
- Onshore spot remains wedged sub 7.3200. We may have seen more downside today, but the USD/CNY fixing was set modestly higher, which went against market expectations, with the Bloomberg consensus estimate for today noticeably lower today compared with Wednesday (in line with softer USD backdrop).
- The authorities may be aiming to keep sentiment as steady as possible, particularly after September indicated strong capital outflow pressures.
- The other factor may be the rebound in the CNY NEER, up ~4% from mid July lows. All else equal a weaker NEER is likely to be preferred to a stronger one in terms of the current China backdrop given low inflation and PMI misses this week.
- However, the NEER will move higher if USD/CNY is roughly stable in a stronger USD environment. With a weaker USD evident in the past 24 hours, the authorities may be comfortable with some CNY underperformance as pay back to these recent trends.
Fig 1: Yuan Implied Vol Continues To Fall Sharply
Source: MNI - Market News/Bloomberg
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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