CNY fix: Not so in tandem with DXY - Westpac

USD/CNY fixing appears to have deviated slightly away from the DXY index movement of late, after a few days of more in tandem move post National Congress, according to Frances Cheung, Research Analyst at Westpac.

Key Quotes

“Investors also seem to be keen to expect at least a stable CNY during Trump’s visit to China. We, however, expect the yuan to follow more the broad dollar move, i.e. with upward bias to USD/CNY based on our dollar view.” 

“CNH forward points have been on a broad uptrend since the low in early September. This trend has coincided with the surge in foreign holdings of onshore NCDs, which might have led to some s/b flows in USD/CNH. Asset swaps into onshore NCDs remain viable, with for example a 3M AAA NCD rate at 4.6% versus 3M CNH CCS at 3.80%. If foreign interest in RMB assets is sustained, then related s/b flows in USD/CNH may continue.”