CNH: USD/CNH Near 7.2500, CNY Basket Remains At Multi Month Lows
USD/CNH tracks near 7.2480 in latest dealings, little changed from end Thursday levels in NY. CNH lost a modest 0.09% for Thursday's session and post yesterday's Asia Pac session, USD/CNH didn't drift much beyond 7.2450-7.2550. Earlier lows were close to 7.2300 on Thursday. USD/CNY spot finished up at 7.2432. The CNY CFETS basket tracker (per BBG) was unchanged at 98.77, so still at multi month lows.
- Downside focus for USD/CNH remains on the recent test of the simple 200-day MA, which comes in at 7.2220. The pair is also back above the 200-day EMA. In terms of topside focus points, the 20 and 100-day EMAs are near 7.2600, the 50-day is higher near 7.2710.
- China and Hong Kong stock markets have lost momentum in recent sessions, the CSI 300 down a cumulative 1% through Wed-Thurs. Still, with global jitters returning on Thursday, these markets may still be seen as attractive. The China to world equity ratio is just off recent highs.
- Trade conflict headlines seem more centered on US and EU, as well as with Canada. Still, little progress (at face value) appears to have been made in terms US-China tariffs/trade issues.
- The local data calendar new loans/aggregate finance figures for Feb due soon (today or tomorrow), while next Monday delivers Feb new home prices, along Feb IP, retail sales and other activity metrics.
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AUSSIE BONDS: Solid Digestion Of May-41 Supply
The latest ACGB May-41 supply auction continued the recent trend of firm pricing, with the weighted average yield printing 0.22bps through prevailing mids (per Yieldbroker).
- The cover ratio increased to a robust 3.7875x, reflecting solid demand.
- Today's auction was likely bolstered by steeper 3/10 and 10/20 yield curves and the recent improvement in sentiment toward longer-dated global bonds.
- In early post-auction trading, XM futures and the bond line have shown little movement.
JPY: USD/JPY Pressing Higher, Close To 153.00, Ueda In Parliament Soon
USD/JPY is continuing to recover, the pair last near 152.90, near session highs and up 0.30% versus end NY close levels from Tuesday trade. Japan markets return today after yesterday's public holiday, so there could be some focus on the Tokyo fix, as last week USD/JPY tracked lower in the lead up to the fixing. Other G10 movements are close to unchanged at this stage.
- For USD/JPY technicals, we are testing the Feb 6 highs of 152.89. Note the Jan 27 low of 153.72 is a further potential upside target. The 50-day EMA is back at 154.70. Note as well some option expiries today (for NY cut later), Y153.00-15($884mln), Y153.50-70($1.7bln), which could influence spot.
- The firmer core yield backdrop is aiding the USD/JPY rebound, weakness in yen against crosses. US-JP yield differentials have ticked up from recent lows, the 10spread more so than the 2yr. The 10yr was last +321bps, against recent lows of +313bps.
- BoJ Governor Ueda will appear in parliament at 10:05am local time, so in just under an hour.
AUSSIE BONDS: ACGB May-41 Auction Result
The AOFM sells A$400mn of the 2.75% 21 May 2041 bond, #TB156:
- Average Yield (%): 4.7553 (prev. 4.8759)
- High Yield (%): 4.7575 (prev. 4.8800)
- Bid/Cover: 3.7875x (prev. 3.3333x)
- Allotted at Highest Accepted Yield as % of Bid at that Yield (%): 75.7 (prev. 37.5)
- Bidders: 41 (prev. 49), successful 14 (prev. 16), allocated in full 9 (prev. 9)
