USD/CNY: More upside than downside risk - Westpac

China’s February manufacturing PMI was softer than expected as the Chinese New Year effect cannot fully explain the drop and the outcome is unlikely to impact USD/CNY much as the pair seldom reacts to a single data point, explains Frances Cheung, Research Analyst at Westpac.

Key Quotes

“That said, premised on expected USD strength running into the March FOMC, there is more upside than downside risk to USD/CNY. A PBoC adviser was quoted as saying “Policy makers will likely steer clear as long as the [CNY] fluctuations are not one-way or very big, and the counter-cyclical factor won’t come back in 2018”. We highlight the criteria mentioned, with which minimal FX smoothing is not surprising.”