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USD/NH Close To 7.2700 Amid Yen Weakness, Industrial Profits Slow

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USD/CNH mostly gravitated higher post the Asia close on Friday. We ended the NY session near 7.2700, but sit slightly lower in earlier Monday trade, last near 7.2675. CNH lost 0.18% on Friday, similar to broader USD gains (BBDXY +0.26%), as yen weakness post the BoJ aided broader USD sentiment. Onshore spot finished up close to the upper end of the daily trading band, at 7.2465.

  • Over the weekend, China March industrial profits fell -3.5% in y/y terms. This took momentum back towards mid-2023 levels. Y/Y momentum is likely to be volatile given base effects from 2023, but overall Q1 profits were down on those seen last year.
  • This follows some signs of loss of momentum elsewhere in the economy in March, in terms of industrial production and retail sales prints. Note we get the official April PMIs tomorrow. Manufacturing is forecast at 50.3 from 50.8 prior. The non-manufacturing read is projected at 52.3, versus 53.0 prior.
  • Elsewhere focus will rest on the USD/CNY fixing, which has been steady since pushing above 7.1000. Devaluation speculation is likely to continue to a degree so long as onshore spot USD/CNY remains close to the top end of the trading band.
  • Relative equity trends are pointing to a more resilient FX backdrop, with the US Golden Dragon index rising each session last week (up 8.84% for the week). The CSI 300 also finished higher on Friday, albeit with a more modest gain for the week. Tech optimism and attractive valuations are seen as positives for the space/
  • The city of Chengdu also relaxed home buying rules, per BBG (see this link).
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USD/CNH mostly gravitated higher post the Asia close on Friday. We ended the NY session near 7.2700, but sit slightly lower in earlier Monday trade, last near 7.2675. CNH lost 0.18% on Friday, similar to broader USD gains (BBDXY +0.26%), as yen weakness post the BoJ aided broader USD sentiment. Onshore spot finished up close to the upper end of the daily trading band, at 7.2465.

  • Over the weekend, China March industrial profits fell -3.5% in y/y terms. This took momentum back towards mid-2023 levels. Y/Y momentum is likely to be volatile given base effects from 2023, but overall Q1 profits were down on those seen last year.
  • This follows some signs of loss of momentum elsewhere in the economy in March, in terms of industrial production and retail sales prints. Note we get the official April PMIs tomorrow. Manufacturing is forecast at 50.3 from 50.8 prior. The non-manufacturing read is projected at 52.3, versus 53.0 prior.
  • Elsewhere focus will rest on the USD/CNY fixing, which has been steady since pushing above 7.1000. Devaluation speculation is likely to continue to a degree so long as onshore spot USD/CNY remains close to the top end of the trading band.
  • Relative equity trends are pointing to a more resilient FX backdrop, with the US Golden Dragon index rising each session last week (up 8.84% for the week). The CSI 300 also finished higher on Friday, albeit with a more modest gain for the week. Tech optimism and attractive valuations are seen as positives for the space/
  • The city of Chengdu also relaxed home buying rules, per BBG (see this link).