Despite a firm bout of volatility in.......>

CHINA FX: Despite a firm bout of volatility in trading partner's currencies on

disappointing Chinese PMI data, CNH was somewhat stable overnight, sitting

broadly flat on the week for the offshore at 6.74. Implied vols pulled back

also, returning closer to the recent cycle lows printed at 3.34 points for the

1m measure. Spot USD/CNY holds between the 50- and 100-dmas, with first

resistance seen at 6.7712 and support at 6.7146.

-CNH's relative lack of reaction to the Chinese data may be due to the PMI

numbers suggesting some stabilisation in the domestic economy and the only

modest growth suggested by PMIs may add to the case for the Chinese authorities

to help support key industries through RRR cuts or fiscal expansion.

-MNI exclusive reports earlier today suggested that China is not about to accede

to U.S. demands to stop importing oil from Iran, but the issue is unlikely to

spoil trade talks between the two countries according to two advisors for the

Chinese government. One advisor added that US sanctions on Iranian crude could,

in fact, promote the use of the yuan.