Yuan NEER Back Close To Mid Feb Highs, LPRs Seen On Hold Today

USD/CNH spent most of the post Asia close drifting higher. Beta with respect to USD moves remained modest. We got to a high of 7.2143, but sit back at 7.2120/25 in early Wednesday dealings. This was a 0.08% CNH loss against the BBDXY gain of 0.23%. Recent highs in USD/CNH at 7.2176 remain intact. USD/CNY spot finished up very close to 7.2000, while the CNY NEER (J.P. Morgan index) rallied 0.31% to 124.715. This isn't too far off mid Feb highs for the index.

• Bloomberg notes that state banks were reportedly selling USDs in the onshore market yesterday. Spot USD/CNY hasn't been above the 7.2000 level since Nov last year. Also note there is a chunky $2.9bn option expiry at 7.2000 for USD/CNY at the NY cut later today.
• The CNH didn't receive much relief from a pull back in US yields through Tuesday US trade. However, as we have noted recently, USD/CNH has generally been too low relative to the recent rise in US-CH yield differentials, so may see less benefit on any short term pullback.
• On the data front today we have the 5yr and 1yr LPR decisions, although no change is expected. This would be in line with the recent steady MLF outcome. The 1yr is currently at 3.45%, the 5yr at 3.95%.
• In the equity space, the Golden Dragon index lost 0.59% in Tuesday US trade. We had negative trends for onshore and Hong Kong equities yesterday (CSI 300 down -0.72%). Property and tech worries weighed and ended the run of positive Northbound stock connect inflows.
• The state council unveiled plans to open up China to more foreign investment flows (see this BBG link). Part of the plan is to also attract more bond inflows (see this link).