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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
CNH
USD/CNH sits back at the 6.8750 region, not too far off lows for the week. We are more than 350pips below yesterday's high as well, which came in above the 6.9100 level. This is consistent with further downside in the major USD indices. Still the pair has lagged broader USD weakness in the past week or so, opening a modest wedge with the BBDXY index, see the chart below. The CNY NEER remains near recent lows, last around 125.11 (J.P. Morgan).
- The source of this underperformance may reflect a number of factors. Month and quarter end could be impacting FX flows, although China's strong trade surplus should be driving USD sales at the margin by exporters.
- China equity performance has flatlined versus the rest of the world, as global equities have rebounded, with global banking risks seemingly receding. This may have reduced safe haven appeal for CNH (with JPY also underperforming USD weakness this past week).
- Some concern around the growth backdrop in China may also be at play, given weaker profit results earlier in the week.
- We get a further update today, with official March PMIs on tap, with the market expecting a pullback from the heady Feb prints (see this link more details). Premier Li noted though that March economic conditions were better than Jan/Feb in comments at the Boao Forum yesterday.
Fig 1: CNH Underperforming Recent USD Weakness
Source: MNI - Market News/Bloomberg
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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