FXStreet (Bali) - AUD/USD continues to be sold, in line with the recent underlying bearish trend of 2016, with another stable USD/CNY fix by the PBOC providing little comfort to the pair, which saw a brief drive through 0.70 in early Asia before the current 50 cents drop. CNY-CNH gap closed, risk to recover? Despite the drop in the Aussie, one potential development during Asia that may help stabilize the Aussie value is the continuous squeeze of CNH shorts as offshore yuan (CNH) implied overnight deposit rate hit a record high at 82%, causing a major narrowing of the CNY-CNH gap, to the point of the CNY paid at a discount vs CNH. The drop in USD/CNH should be perceived as a risk positive event for markets. Yuan positions squeeze AUD positive? According to Sean Lee, Founder at FXWW: "Bit of a throwback to the 1992 when CBs like the Swedish and Irish put o/n rates up to draconian levels to squeeze the speculators out post GBP and ITL devaluations. Looks like the Chinese are using the same playbook. CNH o/n rates up at record levels of 94%. Reuters reporting that suspected intervention from CB has drained liquidity in the offshore mkt. Surely this will squeeze many of the speccy short Yuan positions out quick sharp? Should be bullish AUD." For more information, read our latest forex news.