Free Trial
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.
CNH
The PBOC delivered another pushback against recent yuan strength by setting the central USD/CNY mid-point considerably above market expectations. The mid-point was fixed at CNY6.3702, 179 pips above Bloomberg's average estimate, voicing their discomfort with recent yuan levels. The divergence between the fixing and the average estimate was the largest on record.
- Recall that the PBOC yesterday raised their FX reserve requirement ratio by 2 percentage points to 9%. The People's Bank request for banks to hold more foreign currencies in reserve resulted in broad-based yuan sales on Thursday. It was the second hike this year, while the one in June was the first such move since 2007.
- Separately, PBOC Gov Yi voiced the government's reluctance to bail out Evergrande, noting that its troubles are a market event and will be dealt with accordingly.
- After Yi's speech, Fitch downgraded Evergrande & Kaisa to restricted default over the former's missed dollar bond coupon payment and the latter's failure to repay a $400mn dollar bond earlier this week.
- Spot USD/CNH shot higher immediately after the PBOC fixing, topping out at CNH6.3893. The rate has promptly given away those gains and last trades at CNH6.3786, slightly below neutral levels.
- Bears look for a deeper pullback towards CNH6.3305, a multi-year low printed two days ago. Bulls keep an eye on Nov 26 high of CNH6.3999 and a break here would open up Oct 29 high of CNH6.4104.
Fig. 1: PBOC USD/CNY Fixing - BBG USD/CNY Fixing Estimate Spread (pips)
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.
We are facing technical issues, please contact our team.
ok
Your request was sent sucessfully! Our team will contact you soon.
ok