Service Sector Picks Up Pace Of Expansion

The PBOC fixed USD/CNY at 6.5527, 7 pips above sell side estimates, but some 122 pips below Friday's fix, playing catch up after the market holiday yesterday. Offshore yuan has weakened post fix, USD/CNH last down up 56 pips at 6.5623, rising off lows.

• Data earlier in the session showed Caixin Services PMI rose to 54.3 in March from 52.1 previously, this denotes the highest reading since December 2020 and the eleventh consecutive month of expansion. Commenting on the China General Services PMI data, Dr. Wang Zhe, Senior Economist at Caixin Insight Group said: "The Covid-19 flare-ups that occurred in the fall and the winter have basically died down, and the services sector has quickly recovered with supply and demand expanding. Compared with strong domestic demand, overseas demand is still in need of improvement. The measure for new export business remained in contractionary territory for the second straight month, though the contraction was limited. With the market's positive outlook, services sector employment significantly improved, with its measure climbing over 3 points in March, returning to positive territory. However, the increase in the number of workers was still not sufficient to support the influx of new orders, so backlogs slightly increased. Inflationary pressure increased as input costs and output prices remained high. Increases in raw material prices, labor costs and energy prices drove up the measure for input costs for the ninth straight month. Due to the rising costs, the prices charged by service providers remained in expansionary territory for the eighth straight month. Service providers were very confident about the prospects for the economic recovery and getting the pandemic under control. The gauge for business expectations rose to the highest point since February 2011."
• Elsewhere, China has clashed with Japan over diplomatic relations. China's foreign minister reportedly told his Japanese counterpart to stay away from internal issues such as Xinjiang and Hong Kong.