Offshore Yuan Shows Limited Reaction To Disappointing PMI Numbers

Offshore yuan has weakened after China's official & Caixin Manufacturing PMI readings undershot expectations, albeit the redback's losses against the greenback have been fairly limited so far.

• China's official M'fing PMI unexpectedly slipped into contraction in July, printing at 49.0 after June's 50.2. Consensus was looking for an uptick to 50.3. Caixin M'fing PMI released this morning registered at 50.4 in July, down from June's 51.7 and below the median estimate of 51.5.
• The main takeaway from the surveys is that China's recovery is facing headwinds as COVID-19 flare-ups continue to pop up. While the Caixin gauge (mainly tracking private, export-oriented firms) held above the breakeven level, external demand may abate along the global economic slowdown.
• Elsewhere, tensions between China and the U.S. over House Speaker Pelosi's touted plan to visit Taiwan continued to simmer, even as the trip has been skipped in Pelosi's official itinerary. Still, Beijing stepped up combative rhetoric and held live-fire naval exercises near Taiwan.
• The PBOC set the mid-point of permitted USD/CNY trading range at CNY6.7467 today, 11 pips above the average estimate in a Bloomberg survey.
• The BBDXY index has lost some altitude in early Asia hours and last sits -2 figs at 1,265, likely pressured by renewed JPY purchases.
• Spot USD/CNH last changes hands at CNH6.7521, up 24 pips on the day. Bulls need a break above Jul 14 high of CNH6.7918 before targeting May 13 high of CNH6.8380. Conversely, bears look for a dip through Jun 15 low of CNH6.6669.
• Caixin Services PMI will be published on Wednesday, with flash Q2 BoP current account balance coming up Friday.