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CNH Continues To Outperform Firmer USD Backdrop, Feb Activity Figures Out Today

CNH

USD/CNH sits near 7.2050 in early Monday Asia Pac dealings. This is close to Friday highs (near 7.2070), but the currency was close to unchanged for Friday's session, despite a broadly positive USD backdrop (higher US yields amid inflation pressures signs were supportive). Spot USD/CNY finished up at 7.1970 on Friday. The CNY NEER (J.P. Morgan Index) rose another 0.11% to 124.19, up comfortably last week as the yuan outperformed the USD bounce.

  • On Friday we had Feb aggregate finance/new loan figures, which were weaker than expected. Weakness in consumer related loan demand (particularly in relation to housing) offset firmer corporate loan demand growth.
  • Today we have Feb activity figures out for retail sales, industrial production, fixed asset investment, along with the jobless rate. Note all figures will be in ytd y/y terms on account of the Feb LNY, which may make interpretation of the figures a little tricky. Retail sales are projected at 5.6%, IP at 5.3%.
  • China government yields remain off recent lows, but there was no follow through momentum on Friday post the steady MLF and liquidity withdrawal. The 2yr finished down at 2.05%, off by nearly 2bps. The 10yr steady near 2.35%.
  • US-CH yield differentials are pointing to upside USD/CNH risks, but focus will be on whether USD/CNY onshore spot can break above 7.2000.
  • In the equity space, we had another loss of 0.41% for the Golden Dragon index in Friday US trade. This followed modestly positive onshore gains on Friday (+0.22% for the CSI 300), although Hong Kong shares ended the week down.
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