PBOC Leans Against Wind Of Yuan Appreciation, Market Sentiment Stabilises

The greenback crept higher in tandem with U.S. Treasury yields as market sentiment stabilised, with Monday's unrest caused by sweeping Western sanctions against Russia now in the rearview mirror. Demand for the Japanese yen and Swiss franc waned as safe haven assets lost their allure. High-beta FX were generally better bid, albeit the kiwi dollar retreated amid thin local headline flow.

• Spot USD/RUB edged lower but remained comfortably above the RUB100 mark. Japan confirmed it was joining sanctions against Russia, which would limit the CBR's access to tens of billions of dollars worth of its yen-denominated FX reserves. Bloomberg data showed that the indicative bid-ask spread for USD/RUB was the widest since at least early November.
• The PBOC signalled its discomfort with recent yuan appreciation via the daily fixing of USD/CNY reference rate. The mid-point of permitted trading band for the yuan was set at CNY6.3014, 59 pips above sell-side estimate. The weaker than expected fixing came on the heels of a Reuters report noting that "major Chinese state-owned banks were buying dollars in the onshore spot currency market on Monday, in what appeared to be attempts to defend the yuan from rising past the 6.31 per dollar level." Spot USD/CNH clawed back its initial losses even as the results of official & Caixin PMI surveys showed that China's manufacturing sector unexpectedly avoided contraction in February.
• German CPI, Canadian GDP and a slew of PMI readings from across the globe will take focus later in the day, alongside speeches from Fed's Bostic & Mester, BoE's Mann & Saunders and Norges Bank's Bache.