The offshore yuan surged over 1% against the US dollar on the last trading day of May. USD/CNH broke below the key support level of 6.78 and fell further, to the 6.772 area, its lowest level since 17 October. 

This unusual currency movement was owed to short-recovering activities, a practice involving short sellers starting to unwind their positions due to a surge in CNH’s borrowing costs in Hong Kong. The overnight yuan interbank rate in Hong Kong jumped to 21% per annum on Wednesday, making it expensive for short sellers to hold their positions, resulting in a ‘short squeeze’. 

It was widely believed that policymakers’ interventions were behind this drama, as they wanted to prove the government’s ability to stabilise the offshore currency market, and slam the assumption of one-way depreciation of its currency after Moody’s downgrade. 

Though some mainland media called it ‘a victorious defence against renminbi shorting’, government intervention marks another set-back of the offshore market’s liberalisation, hammering foreign investors’ interest in the offshore yuan. 
Because you have no idea what the government’s next move will be. 

Trump expects to withdraw from Paris climate accord 

President Trump plans to withdraw the US from the Paris climate accord, an agreement with nearly 200 nations agreeing to voluntarily reduce greenhouse gas emissions to help fight climate change. His official announcement is expected in the next few days. 

This is not a surprise at all, as President Trump has put the economy and job growth on top of his presidential agenda since his election campaign, and he had previously hinted that too much regulation and climate commitment were hurdles for the energy sector. US equities rebounded from earlier losses after this announcement.

USD/CNH

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

CMC Markets Singapore may provide or make available research analysis or reports prepared or issued by entities within the CMC Markets group of companies, located and regulated under the laws in a foreign jurisdictions, in accordance with regulation 32C of the Financial Advisers Regulations. Where such information is issued or promulgated to a person who is not an accredited investor, expert investor or institutional investor, CMC Markets Singapore accepts legal responsibility for the contents of the analysis or report, to the extent required by law. Recipients of such information who are resident in Singapore may contact CMC Markets Singapore on 1800 559 6000 for any matters arising from or in connection with the information.