USD/CNH holds steady near 7.2650, China state-owned banks intervene in Yuan after falling near seven-month low
Source Fxstreet
- USD/CNH trades with mild gains around 7.2650 on Tuesday.
- The stronger US employment data sparked a paring of bets for Fed rate cuts this year, boosting the USD broadly.
- China’s major state-owned banks spotted selling Dollars for Yuan in onshore FX market to stabilise Chinese currency, said Reuters.
- The US May CPI inflation data and Fed interest rate decision on Wednesday will be closely watched.
The USD/CNH pair trades flat near 7.2650 during the early European session on Tuesday. The onshore Yuan (CNH) bounces off the seven-month lows amid the foreign exchange (FX) intervention against a strengthening US Dollar (USD) from China’s major state-owned banks.
The Greenback edged higher in the previous sessions, supported by higher US Treasury bond yields after surprisingly robust US employment data last week. The US economy created far more jobs than expected in May, which dampened the expectation that the US Fed would start cutting interest rates in September. Traders have priced in a nearly 47% possibility of a Fed rate cut for September, down from 68% before the NFP data, according to the CME FedWatch tool. The US Nonfarm Payrolls (NFP) climbed 272,000 in May from a 165,000 increase (revised from 175,000) in April and came in above the forecast of 185,000.
The Chinese Yuan fell to a near seven-month low against the USD on Tuesday, prompting China’s state banks to sell Dollars for Yuan in the onshore spot FX market on Tuesday to keep the local currency from falling too quickly, according to Reuters.
Investors will closely watch the US May Consumer Price Index (CPI) data, which is due on Wednesday. The CPI inflation figure is estimated to show an increase of 3.4% YoY in May, while the core CPI is projected to rise 3.5% YoY in the same report period. Later on Wednesday, the Fed monetary policy meeting will be in the spotlight, with no change in rate expected. After the meeting, the Fed will update the Summary of Economic Projections (SEP). Market players will keep an eye on the tone of the meeting. The hawkish comments from Fed officials might further lift the USD broadly and create a tailwind for USD/CNH.
Disclaimer: For information purposes only. Past performance is not indicative of future results.
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