Societe Generale analysts highlight that CNY strength has resumed, with USD/CNY nearing 6.80 for the first time in three years as China-linked tankers transit the Strait of Hormuz. They argue the Yuan is acting as a regional safe haven, supported by China’s energy resilience and policy backing, even as domestic credit growth slows and 10-year CGB yields slip below 1.79%.

Yuan benefits from regional safe-haven bid

"The CNY rally resumes with 6.80 in touching distance for the first time in three years as Chinese linked tanker transits SoH – the yuan has increasingly taken on a regional safe-haven role, supported by China’s energy resilience, policy backing and limited exposure to the Middle East conflict."

"This safe-haven dynamic extends beyond the currency: both onshore equities and bonds are behaving defensively."

"Notably, the 90-day correlation between the CSI 300 and Bloomberg China Treasury Total Return Index turned positive in mid-March, signalling the two asset classes are moving in tandem and outperforming Western and regional peers during bouts of risk aversion."

"Meanwhile, China’s credit data out yesterday was disappointing with outstanding credit growth slowing to 7.9% yoy, the weakest since November 2024."

"The 10y CGB yield has drifted below 1.79% (200dma) and with sentiment already fragile, CGBs could attract further bids if 1Q GDP and activity prints disappoint tomorrow."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)