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Underperforms USD Sell Off Amid Dovish PBOC Rhetoric

CNH

USD/CNH got to 7.2176 late yesterday, before falling through US trade to 7.2065. We track near 7.2100 in early Thursday dealings. This left CNH little changed for Wednesday's session underperforming broader USD softness (BBDXY -0.34%). Spot USD/CNY finished up at 7.1975, while the CNY NEER (J.P. Morgan index) fell 0.19% to 124.10 on account of yuan underperformance.

  • Late CNH weakness reflected dovish rhetoric from PBoC Governor Pan on the sidelines of the NPC. The Governor stated there is ample monetary policy room, while also adding there is also room for a further RRR cut. See this link for more details.
  • Officials also expressed confidence in hitting this year's growth target (see this link), while Shanghai will boost FX futures and options products/trading to aid the city's development as a global yuan hub.
  • The dovishness around the monetary policy outlook has kept onshore bond yields softer. The 10yr closed under 2.30%. Note we started 2024 closer to 2.7% for this benchmark. Lower US yields through US trade amid slightly weaker jobs data, helped USD/CNH shift lower.
  • In the equity space, the Golden Dragon index rebounded nearly 2% in Wednesday US trade, taking positive cues from Hong Kong tech gains. Onshore markets were down modestly in cash trade on Wednesday. Official comments pointed to a continued tightening of equity market regulations, as the new CSRC Chair continues to provide a tighter regulatory grip.
  • On the data front today we have Feb trade figures.

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