China: PBoC drained a net CNY595bn via OMOs for the week – RBC CM

Sue Trinh, Senior Currency Strategist at RBC Capital Markets, notes that for the week, PBC has drained a net CNY595bn via OMOs, up from a CNY375bn drain last week.

Key Quotes

“The overnight implied deposit rate for CNH spiked to a new record over 112% and the spread between CNH and CNY spot reached the widest since 2010 (CNH at a premium). While some in the market expect depreciation in Yuan to continue after the Trump inauguration on 20 Jan, we have expected tight liquidity to cap USD/CNH below 7.0 until early February. Dec FX reserves are due out on the weekend. We expect that USD3trn has psychological importance and reserves should hold above this level for now (cons: $3.01trn).”