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CNH Edges Off Highs as PBoC Look to Shore Up Liquidity

FOREX
  • The Chinese currency trades softer after the PBoC announced a 25bps cut to the reserve requirement ratio, effective March 27th. While policy action was expected, the decision may be coming sooner-than-expected, as Chinese authorities look to shore up banking sector liquidity given the recent spell of global uncertainty.
  • Spot USD/CNH trimmed losses on the headline, with bears looking for a break below the 50-DMA at CNH6.8375 after piercing that moving average but failing to close below it on Mar 13. USD/CNY sits -127 pips at CNY6.8853 and bears would be pleased by a move through the 50-DMA, which intersects at CNY6.8438. Below there we have a key trendline which capped gains in December and then turned into a support this year, it kicks in at CNY6.8242.
  • The greenback is weaker, extending the recovery in the major pairs off yesterday's lows, as the risk drop takes a breather and allows equities to hover close to the week's best levels.
  • Elsewhere, NOK trades well, with USD/NOK over 1% lower on the day amid a stabilising oil price and local rate re-pricing. Prices are still some way off testing the next key support at 10.5105, the Wednesday low - and slippage here would open 10.4563, the 38.2% Fib for the Jan - Mar upleg. Norges Bank pricing took a knock late last week/early this week alongside the global rate re-pricing, but has recovered off lows, with the 3x6 NOK FRA clearing 3.50% today for the first time since late November.
  • Focus Friday turns to final revisions for February Eurozone CPI and the prelim reading for the Uni of Michigan sentiment survey.
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