The USD/CNY forex swaps are lower as yuan liquidity conditions improve. The one-year USD/CNY forex swap is quoted at a premium of 1499 pips from the spot vs a 1520 pips premium late Tuesday. However, according to a Shanghai-based foreign bank trader, the swaps have limited downside in the near term as the yuan and the dollar still have a large interest rate gap, "especially the long-ends which are little effected by liquidity conditions." The USD/CNY spot is at 6.3027 vs 6.3066 late Tuesday. Offshore, one-year USD/CNY NDFs are at 6.4170/6.4200 from 6.4170/6.4220 late Tuesday.
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