CHINA: PBOC Withdraws CNY103bn During OMO

• CHINA PBOC CONDUCTS CNY46.5 BLN VIA 7-DAY REVERSE REPO TUES

The BBDXY range overnight was 1203.45-1207.21, Asia is currently trading around 1207,+0.20%. The coordinated intervention in USD/JPY had a big impact on a market that looks to have been caught wrong-footed. The market is bouncing off the 1200 area after absorbing what could have been around $100 billion USD’s entering into the system. I have been skewed toward fading a dip, looking for a retest of the pivotal 1230-1235 area at some point. So I will be watching closely to see how this clean out continues to unfold. Strong support comes in back toward 1197-1200 but a sustained break back below there and we could see the downtrend reassert itself. The wind has been taken out the bullish USD sails for now, and we could see some consolidation as the market tries to find its footing again, 1195-1215 should cover it.                              

• Hedgie on X: “Japan holds about $1.1 trillion in US Treasuries. If they keep doing this alone, they eventually sell some of those Treasuries to fund it, which pushes US yields higher and hurts American borrowers. That's why Bessent got involved and used euros this time instead of dollars.” https://x.com/HedgieMarkets/status/2084376413411721644?s=20
• Joseph Wang on X: “Bessent's promotion of the FIMA Repo Facility is just theatre to boost the effect of his FX intervention - similar to his leaking of the his 'to do list.' FIMA Repo makes no sense for Japan. The open secret is Japan already has hundreds of billions of dollars parked at the Fed's foreign repo pool, basically a checking account for foreign central banks. This can be inferred from public data after the facility was uncapped.” 
• “Also note private sector repo is abundant, trading at notably lower rates than the FIMA facility offering rate, and would not be publicly disclosed weekly. Of course, Japan has access to standing Fed swap lines too. So it never has to sell Treasuries to get dollars.”  
• The BBDXY Average True Range for the last 10 Trading days: 5.07 Points

Fig 1: BBDXY Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

The USD/CNY fix printed at 6.7917 slightly up on yesterday's result of 6.7898. The fixing is holding fairly steady under 6.7900 in recent sessions, while the error term is has fallen to +296pips (yesterday was +516pips). Broader USD shifts are mixed today haven't impacted sentiment in the USD/CNH space so far today. We were last 6.7586 - 6.7590, little changed for the session.