HALISTER1: INSIDE CHINA: Yuan Rises as PBOC Strengthens Rate for Second Day

INSIDE CHINA: Yuan Rises as PBOC Strengthens Rate for Second Day

(Bloomberg) -- Yuan advances after the PBOC strengthened the daily reference rate for a second day, with the currency also tracking gains in the broader Asian market.
  • PBOC raised the reference rate by 0.2% to 6.6671 vs USD
  • The gains in Asian currencies today is driven by position adjustments ahead of the FOMC meeting, according to ANZ senior FX strategist Irene Cheung, who predicts just one rate hike by the Fed in Dec
  • The Chinese central bank will continue to manage mkt expectations until yuan’s SDR inclusion on Oct 1, Scotiabank Asia FX strategist Gao Qi writes in a note today
  • CNY gains 0.06% to 6.6706 vs USD, while CNH rises 0.07% to 6.6753
  • USD/CNH support at 6.6754, 6.6683, 6.6661; resistance at 6.6913, 6.7007, 6.7131
  • Investors are chasing yields, and have bought municipal bonds vs sovereign debt. Turnover jumps to a record 227 billion yuan in June, according to latest available data
    • China bond mkt to extend rally with shortage of assets: CICC
    • Yield of 10-yr bond little changed at 2.795%
  • Earliest China private indicators signal sentiment on upswing in July
  • China to keep prudent monetary policy and proactive fiscal policy in 2H, according to a government statement late yesterday following a Politburo meeting
  • Yuan may dip to 6.75 by year end, though China would prefer to stabilize the currency in 4Q because of key events such as U.S. presidential election, according to ANZ’s Cheung
  • Bloomberg synthetic CFETS index little changed today at 95.3360
  • 7-day repo rate falls 16.6 bps to 2.27%
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
PBCZ CH (People's Bank Of China)

People
Irene Cheung (Australia & New Zealand Banking Group Ltd)
Qi Gao (Bank of Nova Scotia Asia Ltd/Singapore)

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