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CNY and CNH gap is shrinking – BBH

FXStreet (Delhi) – Research Team at BBH, note that in the overnight session, the CNH once again outperformed the CNY and is closing the gap that opened between the two currencies since the August devaluation.

Key Quotes

“Now the two currencies are trading roughly at 6.3650 against the dollar. This is important for the functioning of the onshore/offshore markets, for hedging, as well as for meeting the IMF’s easily accessible criteria for joining the SDR.”

“In addition, the CNH interbank offer rate spiked to a record (since the fixing began in 2013) 8.73%, while short-dated hibor rates rose by as much as 200 bp. One interpretation for this spike is to see it as a consequence of the USD/CNH selling. Unlike the onshore market, the PBOC can’t replenish the immediate shortage of CNH. So unless the HKMA steps in with repos, we can get a spike in rates.”

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