CNH: USD/CNY Fixing Error Positive Trend Continues, USD/CNH Edges Lower

• CHINA SETS YUAN CENTRAL PARITY AT 7.0867 MON VS 7.0880

ACGBs (YM -3.0 & XM -3.5) are weaker after today’s data drop. However, ranges have been narrow, with no cash US tsys trading in today’s Asia-Pac session.

• MNI Tech: Having bounced well on the back of the mild US CPI print, Aussie 3-yr futures reversed course last Wednesday on strong domestic inflation data. This keeps prices well below prior resistance at 96.615, the Sep 12 high, and refocuses attention on 96.280 as the next major support.
• AU household spending rose 0.2% m/m in September versus a revised 0% in August.
• AU building approvals rose 12.0% m/m (estimate +5.0%) in September versus a revised -3.6% in August.
• ANZ job advertisements fell 2.2% m/m in October versus a revised -3.5% in September.
• Cash ACGBs are 3bps cheaper.
• The bills strip is -1 to -3 across contracts, with a steepening bias.
• RBA-dated OIS pricing is showing a 25bp rate cut in November at a 3% probability, with a cumulative 3bps of easing priced by year-end.
• The AOFM plans to sell A$1200mn of the 4.25% 21 March 2036 bond on Wednesday and A$800mn of the 3.00% 21 November 2033 bond on Friday.

The Friday night range was 7.1148 - 7.1259, Asia is currently trading around 7.1220. The USD’s bout of strength continues to assist the retracement we have seen across the board in USD/Asia, strong bids below 7.1000 continue to provide support. The market is trading sideways in the middle of its recent 7.0850-7.1550 range. A move above the 7.1600 area is needed to signal a deeper pullback toward the pivotal 7.2000/2300 area.

• Bloomberg points to China’s language shifts last week around its goal of opening up the financial system. A China strategist at Australia & New Zealand Banking Group said “The goal of capital account liberalization is broader, the move away from the narrow objective of convertibility, together with a wider plan to push forward yuan internationalization, makes it likely that restrictions on yuan inflows and outflows will be largely lifted.”
• “It’s more determined,” said Martin Rasmussen, senior strategist at macro strategy firm Exante Data Inc. “These texts are written very, very carefully and the choice of words will be deliberate.” - BBG
• USD/CNY Options : Close significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 7.0900($400m Nov 6) - BBG.
• Data/Event : RatingDog China PMI Mfg

Fig 1 : USD/CNH Spot Daily Chart

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