CNH: USD/CNH Close To 7.0900 Downside Test As USD/CNY Fixing Approaches

Taiwan and India finished the week with big outflows as overall, major regional markets experienced significant outflows. 

• South Korea: Recorded inflows of +$76m Friday,  bringing the 5-day total to -$416m. 2025 to date flows are -$1,016m. The 5-day average is -$83m, the 20-day average is +$256m and the 100-day average of +$110m.
• Taiwan: Had outflows of -$784m Friday, with total outflows of -$1,156 m over the past 5 days. YTD flows are positive at +$7,185m. The 5-day average is -$231m, the 20-day average of +$354m and the 100-day average of +$223m.
• India: Had outflows of -$462m as of the 25th, with total outflows of -$1,084m over the past 5 days.  YTD flows are negative -$16,286m.  The 5-day average is -$217m, the 20-day average of -$166m and the 100-day average of -$40m.
• Indonesia: Had inflows 0of +$35m Friday, with total inflows of +$307m over the prior five days.  YTD flows are negative -$3,239m.  The 5-day average is +$61m, the 20-day average -$12m and the 100-day average -$2m.
• Thailand: Recorded outflows of -$28m Friday, with outflows totaling -$43m over the past 5 days. YTD flows are negative at -$2,754m. The 5-day average is -$9m, the 20-day average of -$12m and the 100-day average of -$10m.
• Malaysia: Recorded outflows Friday  of -$10m, totaling -$107m over the past 5 days. YTD flows are negative at -$3,743m. The 5-day average is -$21m, the 20-day average of -$13m and the 100-day average of -$10m.
• Philippines: Recorded outflows of -$9m Friday,  with net inflows of +$111m over the past 5 days. YTD flows are negative at -$610m. The 5-day average is +$22m, the 20-day average of +$4m the 100-day average of -$4m.

The Friday night range was 7.1401 - 7.1473, Asia is currently trading around 7.1370. The USD’s bout of strength stalled as the data on Friday came in as expected. This saw the move higher in USD/Asia pause and open a little lower this morning, -0.10%. The market had a look toward its first resistance around 7.1500 after finding good demand sub 7.1000 last week. This week attention will be turning to the US payroll data if released, which will determine if this USD rally can extend or not. Above the 7.1600 area focus will turn back to the pivotal 7.2000/2200 area where sellers should remerge initially. For now though the USD bears look to regain control to start the week.

• “Xi Jinping is planning to use trade talks to push Donald Trump to formally declare the US opposes Taiwan’s independence, the WSJ reported.” - BBG
• The market piled into short USD/EM trades as their preferred vehicle to express USD weakness, the strong bounce since the FOMC as the market recalibrates its dovishness of US rate cuts has seen some of these positions being pared back.
• Bloomberg - “China’s Markets Shed ‘Uninvestable’ Tag as Global Funds Return. Global money managers are venturing back into China after years of aversion, piqued by a world-beating stock rally and the country’s advances in high-tech industries. All of this has been supportive for the yuan, which rose to 7.1 against the dollar this month — the strongest since November.”
• USD/CNY Options : Close significant option expiries for NY cut, based on DTCC data: 7.1100($640m). Upcoming Close Strikes : 7.1900($599m Oct 1) - BBG.

Fig 1 : USD/CNH Spot Daily Chart

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

• The 10-Yr bond future is up +0.13 at 135.92 this morning, yet remains below all major moving averages.  Above is the 20-day EMA of 136.35.  
• The bond market had a fairly subdued week last with the 2-YR finishing the week at 0.92, +1bps higher for the week.
• Bonds are better bid Monday with yield up to half a bp lower in the front end.  
• JGB 10-Yr is at 1.65% this morning having ended Friday +1bp for the week.  
• A big week for data this week with Industrial Production, Retail Sales, Tankan, S&P PMIs and employment data.  
• The NIKKEI hit all time new highs last week and is down Monday by -0.75%