Expectation of US rates rise moves USD/CNH currency basis
Exit of "tourist money" from Asia provides more attractive funding options for firms swapping CNH into USD
Expectations of earlier than anticipated rates rises in the US and a slowdown in China have widened the USD/CNH cross-currency basis, providing significantly cheaper funding opportunities for institutions in Asia.
In recent weeks US Treasury yields have risen by 100 basis points after central bank pronouncements suggesting US quantitative easing would be tapered later this year. Credit problems onshore in China have arrested an appreciation of the offshore version of the Chinese currency (CNH)
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