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Covid Resurgence, Chinese Data Inspire Caution

FOREX

Lingering concern about Covid-19 resurgence in a number of locations across the region (and the resultant tightening of restrictions) undermined broader sentiment. Risk aversion materialising in early Asia-Pac trade deepened as China's economic activity indicators for the month of April proved, on balance, worse than expected. Commodity currencies were dumped, with the kiwi bringing up the rear in G10 pack. BBG trader sources flagged selling pressure from leveraged accounts, which reloaded NZD shorts after a squeeze in Friday's NY session.

  • USD/CNH traded on a firmer footing, but its upswings remained shallow. The PBOC set its central USD/CNY mid-point at CNY6.4307, just 5 pips above sell-side estimates. China's central bank is also set to issue CNH10bn of 3-Month Bills & CNH15bn of 1-Year Bills in HK on Friday.
  • The yen led gains in G10 space on safe haven demand, as e-minis gave up their initial upticks & slid into negative territory. USD was also able to garner some strength, but the DXY remained way off its Friday's high.
  • U.S. Empire M'fing, Italian CPI, Canadian housing starts and Fedspeak from Clarida & Kaplan take focus today.

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