CNH: USD/CNH Back Sub 100-day EMA Amid Broad USD Dip, Caixin Services PMI Today
Mar-04 22:41
USD/CNH tracks near 7.2535 in early Wednesday dealings. CNH gained nearly 0.70% for Tuesday's session, as broader USD sentiment faltered. Concerns over the US economic outlook weighed on dollar sentiment, although US Tsy yields recovered from earlier lows (the 10yr yield rebounding around 15bps as Tuesday's session unfolded). USD/CNY spot finished up at 7.2639, while the CNY CFETS basket tracker slipped 0.16% to 100.016.
- For USD/CNH, we are back sub the 100-day EMA (near 7.2615). Tuesday lows were at 7.2487. On the downside we have the 200-day EMA (7.2384). The 20 and 50-day EMAs sit back in between 7.2765-7.2800.
- China's response to the recent US tariff increased was described as measured. Effective from March 10, China will impose a 15% tariff on chicken, wheat, corn, and cotton imported from the U.S, and a 10% duty on sorghum, soybeans, pork, beef, aquatic products, fruits, vegetables, and dairy products, the Ministry of Finance said in a statement.
- This may have helped CNH at the margin in the sense it is designed not to escalate tensions with the US. Remarks from Trump on Monday around devaluing of the yuan and JPY may also be in play (as the market speculates the authorities will keep the yuan stable to slightly firmer to avoid trade conflict escalation).
- Comments from US Commerce Secretary Lutnick around potential tariff compromise with Mexico and Canada aided the CAD and MXN, but China wasn't mentioned in great detail in the remarks.
- In US trade, the Golden Dragon index rose 1.95%, its first gain in 4 sessions. Yesterday the headline CSI 300 index was close to unchanged.
- On the data front today we have the Caixin PMI services (and composite read) for Feb. The market forecast is a 50.7 read for services (prior was 51.0).
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CNH: USD/CNH Rallies Near Record Highs Following Tariff News, Caixin PMI Today
Feb-02 22:19
USD/CNH sits off earlier highs. The pair got to 7.3734 in early Monday dealings (post weekend tariff news) but sits back near 7.3600 in latest trade. This is still around 0.50% weaker in CNH terms versus end Friday levels. Record intra-session highs in USD/CNH rest at 7.3749 (from 2022) per BBG, so we stopped just short of a test of this level.
- A reminder that onshore markets remain closed until Wednesday, when they return from the LNY break. Hong Kong markets return today so we should see some improvement in liquidity from that standpoint.
- Focus today will be on any China retaliation measures to Trump's 10% tariff announcement from the weekend. China officials vowed action, with the Commerce Ministry stating a lawsuit would be filed with the WTO. Broader measures though weren't specified.
- Higher USD/CNY levels would expected to counteract the tariff response, when onshore markets return on Wednesday. The close before the LNY break was 7.2446, but recent highs rest close to 7.3330
- Today we do have the January Caixin manufacturing PMI out. The market consensus is for a 50.6 print, versus 50.5 prior.
ASIA: Government Bond Issuance Today.
Feb-02 22:07
- Philippines To Sell PHP7.0Bln 91D Bills (PH0000058554)
- Philippines To Sell PHP 7.0Bln 182D Bills (PH0000059131)
- Philippines To Sell PHP 8.0Bln 364D Bills (PH0000059909)
- South Korea to Sell KRW1tn 2-Year Bonds
- Bank of Korea to Sell KRW500bn 91-Day Bonds
- South Korea to Sell KRW1tn 2-Year Bonds
BONDS: NZGBS: Slightly Cheaper, Trade Tensions In Focus
Feb-02 22:01
In local morning trade, NZGBs are 1bp cheaper after US tsys finished Friday with modest losses.
- US tsys were little changed after the economic data but edged higher in yield later in the session. 10-year notes closed 2bp higher at 4.54%.
- Financial markets were volatile into the global close amid conflicting news on the timing for implementing tariffs on US imports. Confirmation that tariffs would be set for Canada and Mexico at 25%, and China at 10%, and begin this week, saw equities retrace earlier gains.
- Over the weekend, Canada and Mexico have announced retaliatory tariffs on the US. In addition, China has said it will take counteractive measures and file a lawsuit with the World Trade Organisation. Trade tensions will remain in focus as markets open for the week.
- China is much more diversified than Canada and Mexico with only 13.3% of its 2024 goods exports going to the US down from 14.8% in 2023. They were worth 2.8% of GDP in 2023. 6.9% of US exports went to China in 2024.
- Swap rates are 1-2bps higher.
- RBNZ dated OIS pricing is little changed. 48bps of easing is priced for February, with a cumulative 123bps by November.
