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  • Yuan drops amid a continued tightening of liquidity conditions in China
  • Weakness in the US stock futures keeps the dollar bid.

Yuan is on the offer, pushing USD/CNY higher despite the tightening of liquidity conditions in China.

The nation’s volume-weighted average of overnight repo rate, one of the best indicators of general liquidity in China, rose to 3.28% early Friday – the highest level since 2015 – extending its recent run higher. The central bank is sucking out liquidity to rein in leverage.

While the CNY gained ground on Thursday, seemingly due to the repo rate uptick, it has failed to keep the momentum going so far today. CNY is trading at 6.4640 per US dollar at press time, down 0.22% on the day. The currency rose by 0.5% to 6.4491 on Thursday.

The anti-risk dollar looks to be benefitting from the risk-off tone in the financial markets. The futures tied to the S&P 500 are down 0.33%, while the Asian stocks are trimming early gains. The losses in the US stock futures indicate a continuation of the flight to safety seen earlier this week on fears of social-media-driven hedge fund selling and due to concerns that the US fiscal stimulus will be smaller than hoped.

 

Technical levels