Chinese authorities have delivered another rate cut – but this time the one-year LPR has been lowered 10 bps to 3.45%, while the 5-year LPR has been unexpectedly left unchanged. The latter rate is seen as more important to Chinese mortgage markets and raises questions about how China plans to stimulate demand in that sector. The rate cut did not see large moves in the Renminbi, and the ongoing low USD/CNY fixings suggest Chinese authorities are trying to draw some kind of line in the sand near 7.35. 

Unlike the Japanese, who are very transparent with their FX intervention activities, it is hard to discern whether Chinese authorities are intervening to sell Dollars near current levels. However, with China employing monetary stimulus, expect the Renminbi to stay soft and remain a popular funding currency.