RMB and SHIBOR both calmed after a volatile May - Natixis

Alicia Garcia Herrero, Chief Economist at Natixis, notes that USDCNY and USDCNH calmed down in June and more so in July after May’s volatility. Since June, CNY has kept its strength against USD while CNH has depreciated from a very strong level (CNY: +0.51% and CNH: -0.53%), she further adds.

Key Quotes

“Such movements ended up reducing the CNH-CNY spread in June.”

“Upon the normalization of RMB developments, offshore CNH HIBOR interest rates dropped substantially (short end in particular) over the past month.”

“China’s FX reserves continued to rise for the 5th consecutive month on the back of reduced capital outflows (attributed to better RMB sentiment) and improved trade balance.”

“As regards the onshore rates, SHIBOR rates rose in June (first-half especially) but eased later due to end of the liquidity hunt for the macro prudential assessment (MPA) conducted by the PBoC as well as its relatively large injection earlier. On an aggregate basis, SHIBOR barely moved in June.”

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