HALISTER1: INSIDE CHINA: Onshore Yuan Dips to Weakest in Month as USD Gains

INSIDE CHINA: Onshore Yuan Dips to Weakest in Month as USD Gains

(Bloomberg) -- Onshore yuan drops to its weakest level in a month, tracking a decline in the region after comments by Fed officials at Jackson Hole spurred dollar gains.
  • CNY falls 0.1% to 6.6786, after dipping to as low as 6.6850
    • Decline was limited by a fixing that was better than what some analysts had expected, with the PBOC setting the reference rate at 6.68560
    • USD/CNH was sold by leveraged accounts after the fixing
  • PBOC’s fixing shows it wants to defend USD/CNY at 6.7, a key physiological level, says Iris Pang, a senior economist of Greater China at Natixis
    • China may be seeking to limit a decline in the currency in order to contain volatility ahead of the G-20 Summit, Mizuho Bank Asian FX strategist Ken Cheung says
  • USD/CNH falls 0.07% to 6.6885
    • USD/CNY support at 6.6655, 6.6477, 6.6230; resistance 6.7003, 6.7007, 6.7195
  • PBOC sells 60b yuan 7-day reverse repo at 2.25% and injects 30b yuan 14-day money at 2.4%, continuing to pump liquidity into the financial system after money-market rates jumped last week
    • The Chinese central bank gauges demands for 7-day and 14-day reverses repos for tomorrow: trader
  • 7-day repo rate falls 11 pips to 2.2589%, a third day of decline. The overnight rate climbs
  • Fear of a liquidity squeeze after the PBOC resumes its 14- day reverse repo operations may be overblown, OANDA senior trader Stephen Innes writes in a note today. After the initial negative fallout, the money markets will quickly normalize
    • China Aug PMI will be closely watched, as July reading indicated a weak start in 3Q
  • Aug. PMI is due Thursday, with Bloomberg survey showing a median estimate of 49.9, the same as in July
  • China may limit monetary easing as industrial profit rises, CICC economists Eva Yi, Liu Wenqi and Liang Hong write in a note
  • July industrial companies’ profit rises 11% y/y, more than double the rate of expansion in June
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Eva Yi (China International Capital Corp Ltd)
Iris Pang (Natixis SA)
Ken Cheung (Mizuho Financial Group Inc)
Liang Hong (China International Capital Corp Ltd)
Stephen Innes (OANDA Corp)

To de-activate this alert, click here

UUID: 7947283