USD/CNH Tracks Recent Ranges, Bond Yields Remain In Focus, Mar Trade Figures Out

USD/CNH saw a brief dip sub 7.2500 post the Asia close on Thursday, while a spike above 7.2600 drew selling interest. This left the pair within recent ranges. USD/CNY spot finished up at 7.2370, with dips in this pair supported. We remain very close to the upper daily trading limit (+2% above the USD/CNY fixing rate).

• Focus will again remain on the CNY fixing, following yesterday's record support (back to 2018) in terms of the fixing relative to the Bloomberg consensus. We also saw reports of onshore USD selling from state banks, as the authorities look to curb the pace of yuan depreciation.
• USD/CNH still looks too low relative to elevated US-CH yield spreads. China bond yields remain wedged close to recent cyclical lows (10yr under 2.30%). Yesterday's inflation update still pointed to a modest domestic demand backdrop, with headline CPI just 0.1% y/y.
• The bond market remains a focus point for the PBoC, particularly how far markets have rallied. See this piece from the MNI policy team from late yesterday.
• Elsewhere small lenders will likely continue to cut deposit rates in an effort to lower financing costs across the economy. See this link for more details.
• On the data front today we have March trade figures (BBG has it slated for 3pm China time, 0800 BST). The market looks for exports to slip back to -1.9% y/y from 5.6% prior. Imports are forecast to rise 1% y/y from -8.2%. We are also still waiting for Mar new loans/aggregate finance figures.