Yuan Loses Shine After PBOC Displays Bearish Bias In Daily Fixing

Spot USD/CNH has bounced into positive territory as the PBOC threw some sand into the gears of yuan appreciation, with participants assessing the latest round of local PMI data.

• While the bearish bias in today's fixing of USD/CNY reference rate was not particularly large by historical standards, it showed that China's central bank is leaning against the wind re: yuan appreciation. The mid-point of the permitted USD/CNY trading band was set at CNY6.3014, 59 pips above sell-side estimate. The weaker than expected fixing came on the heels of a Reuters report noting that "major Chinese state-owned banks were buying dollars in the onshore spot currency market on Monday, in what appeared to be attempts to defend the yuan from rising past the 6.31 per dollar level."
• China's PMI data beat expectations and showed that the manufacturing sector dodged contraction in February. The official gauge, mostly tracking state-owned enterprises, printed at 50.2 (BBG est. 49.8), with its non-manufacturing counterpart rising to 51.6 (BBG est. 51.1). Caixin Manufacturing PMI, which focuses on small, private businesses, returned into expansionary territory as it improved to 50.4 (BBG est. 49.1). Worth flagging that Caixin Services PMI will be published on Thursday.
• Spot USD/CNH now trades +19 pips at CNH6.3159. Topside focus falls on Feb 22 high of CNH6.3445 and a break here would clear the way to Feb 8 high of CNH6.3763. Bears look for losses past Feb 24 low of CNH6.3060 before taking aim at Apr 19, 2018 low of CNH6.2561.