CNY: Lessened risk of spikes in CNH points - Westpac

Sandeep Kanihama FXStreet Contributor

The PBoC announced a slew of relaxation to enhance CNH liquidity, partly for the preparation for potential CNH liquidity demand upon MSCI inclusion, points out Frances Cheung, Research Analyst at Westpac.

Key Quotes

“The changes should greatly relieve liquidity pressure on the offshore CNH market, and reduce the upside risk to CNH forward points. In particular, offshore investors under Stock Connect are allowed access to onshore FX market for funds and FX hedges – this should mean the RMB funds for northbound flows can be sourced from onshore CNY, not necessarily withdrawing liquidity from CNH.”

“That said, on the other hand, there is a lack of trigger for much downside to CNH DF points, as we would imagine that the currency mix when offshore investors remit funds out from onshore China should be required to be similar to the currency mix when they brought in. If that is the case, we expect CNH points to stay around current levels, before we hear further regulatory changes.”

“The CNY was fixed weaker than basket move on some days, and stronger on others, highlighting the authorities’ desire for two-way fluctuations. Forex settlement data suggest a mild inflow, but USD/CNY faces some upside pressure premised on a strong dollar with the next resistance at 6.4355.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

EUR/USD remains depressed below mid-1.1800s; downside potential seems limited

The EUR/USD pair attracts some sellers for the second consecutive day on Tuesday and hovers below mid-1.1800s amid a relatively quiet trading action during the Asian session. The broader fundamental backdrop, however, warrants some caution for bearish traders before positioning for deeper losses.

GBP/USD trades with negative bias, eyes 1.3600 ahead of UK jobs data

The GBP/USD pair trades with a negative bias for the second straight day, though it lacks bearish conviction and holds above the 1.3600 mark through the Asian session on Tuesday. Traders now look forward to the release of the UK monthly jobs report, which will influence the British Pound and provide some impetus to the currency pair.

Gold declines as trading volumes remain subdued due to holidays in China

Gold price extends its losses for the second successive session, trading around $4,930 per troy ounce during the Asian hours on Tuesday. Gold price is trading nearly 0.7% lower at the time of writing as trading volumes stayed thin due to market holidays across China, Hong Kong, and other parts of Asia.

Top Crypto Gainers: Stable, MemeCore and Nexo rally test critical resistance levels

Stable, MemeCore, and Nexo are among the leading gainers in the crypto market over the last 24 hours, while Bitcoin remains below $70,000, suggesting renewed interest in altcoins among investors.

The week ahead: Key inflation readings and why the AI trade could be overdone

It is likely to be a quiet start to the week, with US markets closed on Monday for Presidents Day. European markets are higher across the board and gold is clinging to the $5,000 level after the tamer than expected CPI report in the US reduced haven flows to precious metals.

XRP steadies in narrow range as fund inflows, futures interest rise

Ripple is trading in a narrow range between $1.45 (immediate support) and $1.50 (resistance) at the time of writing on Monday. The remittance token extended its recovery last week, peaking at $1.67 on Sunday from the weekly open at $1.43.