Yuan Rally Falters Amid Renewed Cross Asset Headwinds

USD/CNH rose towards 7.1200 as Monday's session unfolded, before the pair flatlined during US trade, with those markets out due to the Labor Day holiday. The pair tracks near 7.1145 in early Tuesday dealings. CNH lost 0.36% for Monday's session, the largest drop since August 15. Spot USD/CNY finished up at 7.1173 for Monday trade.

• Despite these moves, USD/CNH is still comfortably sub the 20-day EMA (above 7.1400), while late August highs also rest above this level.
• Monday CNH weakness was in line with broader USD trends to some degree, particularly in terms of yen losses. The weakness in core fixed income markets saw both JPY and CHF underperform the rest of the G10. This is also an environment that typically hasn't benefited the yuan.
• Onshore China asset signals were also a headwind for CNH. The CSI 300 lost 1.70% in Monday trade and close at its lowest level since February this year. The property sub index was off over 4%, amid familiar concerns in the space.
• Onshore bond yields slumped at the front end. The 2yr to 1.48%, off 6bps, and fresh cycle lows. The 10yr eased 2.5bps to 2.15%, still above early August lows. The firmer than expected Caixin manufacturing PMI did little to boost growth prospects, with property concerns and the weaker official manufacturing PMI more than offsetting.
• The local data calendar is empty until tomorrow's Caixin services PMI.