HALISTER1: INSIDE CHINA: Yuan Declines as Investors Await U.S. Jobs Data

INSIDE CHINA: Yuan Declines as Investors Await U.S. Jobs Data

(Bloomberg) -- Yuan heads for third-straight weekly drop; sentiment in bond market soft as PBOC tightens funding conditions.
  • CNY down 0.04% at 6.6810 per dollar; CNH down 0.13%, little changed on week
  • Investors sold dollar as DXY picked up in afternoon; at least one big Chinese bank selling at ~6.6800 to stop yuan from further decline, three traders say; NOTE: DXY up 0.13%
    • Yuan is supported as dollar bulls square positions after seeing Chinese banks sell dollar at this level for two days
  • Better-than-expected U.S. non-farm payrolls would send USD/CNY spot and fixing above 6.7, Scotiabank Asia FX strategist Gao Qi writes in note today
  • PBOC likely to defend yuan at 6.7 on Monday if payrolls spur dollar buying, Commerzbank senior economist Zhou Hao says
  • G20 summit starts in Hangzhou this weekend
    • Watch: China’s Growth Blueprint on Display at G20
  • China can guide yuan expectations and has monetary policy tools in case of abnormal yuan moves, PBOC Deputy Governor Yi Gang says
  • Vice Finance Minister Zhu Guangyao calls for more fiscal policy support
  • China GDP growth to slow modestly in 2H; impact of earlier stimulus measures continues to fade, UBS said in note yesterday
    • RRR cuts remain possible this year, though PBOC will likely continue using alternative liquidity provisioning tools instead
  • PBOC unlikely to conduct broad-based easing in 2H, BOCI chief macroeconomy analyst Zhu Qibing says
  • Yield of 2.9% govt bond due May 2026 falls 1 bp to 2.783%; up 5 bps on week
  • China bond market correction has long way to go as it’s clear PBOC aims for gradual deleveraging, Huachuang Securities analyst Qu Qing writes in note today
    • Liquidity still ample because institutional investors have been cutting leveraged positions since resumption of 14-day reverse repo sales
    • PBOC will drain excessive funds through OMO to keep liquidity relatively tight
  • China’s bonds head for third weekly decline as PBOC tightens funding conditions and economy shows signs of stabilizing
  • Central bank conducted 800m yuan SLF, 289b yuan MLF, net PSL 68.3b yuan in Aug.
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Qi Gao (Bank of Nova Scotia Asia Ltd/Singapore)
Qu Qing (Huachuang Securities Co Ltd)
Yi Gang (People's Bank Of China)
Zhu Qibing (Bank of China Ltd)

To de-activate this alert, click here

UUID: 7947283