USD/CNH: Offshore Yuan resilient to reports predicting ZIRP in China

• CNH is gaining ground despite analysts predicting zero interest rate policy in China.  
• Phase two of the US-China trade deal is looking unlikely.  
• Yuan is showing resilience amid signs of risk-on in financial markets.  

China’s offshore Yuan (CNH) is showing no signs of stress despite reports stating that China should prepare for the zero interest rate policy (ZIRP).  

China’s demands for liquidity are growing, foreign capital keeps flowing in amid the slowdown in the real economy, making the country seemingly approaching a zero rates monetary condition, according to Global Times article based on a report by Beijing-based private strategic think tank Anbound.  

Meanwhile, the article also quotes Zhu Haibin, Chief China Economist at JPMorgan, as saying that China is likely to become the next zero interest rate country, as country’s non-financial corporate debt ratio is too high, and interest rates are too high and the repayment burden of existing debt has squeezed out the effective demand for new credit.  

The offshore Yuan, however, is pushing higher against the greenback despite the talk of ZIRP in China. The USD/CNH pair is currently trading at 7.0314, representing marginal losses on the day, having hit a high of 7.0403 in the early Asian session.  

Yuan is also showing resilience to news reports stating that the “phase two” trade deal between the United States and China is looking less likely with the two countries struggling to strike a preliminary “phase one” agreement.

The uptick in CNH is accompanied by signs of risk-on in the related markets. At press time, the futures on the S&P 500 are trading 0.28% higher on the day. Meanwhile, oil benchmarks are trading flat-to-positive.  

Technical levels