Factory activity in February grew at the fastest pace since April 2012, as the official manufacturing purchasing managers' index rose to 52.6 compared from 50.1 in January, beating the consensus forecast from a Reuters poll of analysts.
The latest data confirms that the flashes of domestic demand
seen since the zero-COVID policy ended are now strong enough to
rekindle upstream sectors. An index reading above 50 indicates
expansion in activity on a monthly basis and a reading below
indicates contraction.
"With the Chinese authorities focused on turning the economy
around this year, expect further stimulus and evidence of
economic recovery to boost yuan sentiment," Maybank analysts
said in a research note.
The spot yuan opened at 6.9423 per dollar and was
changing hands at 6.9274 at midday, 61 pips stronger than the
previous late session close and 0.18% stronger than the
midpoint.
The People's Bank of China set the midpoint rate at 6.94 per U.S. dollar prior to market open, firmer than the previous fix 6.9519. The spot rate is currently allowed to trade with a range 2% above or below the official fixing on any given day. On Wednesday Moody's Investors Service raised its forecast for China's real gross domestic product (GDP) growth to 5.0% for both 2023 and 2024, up from its previous projections of 4.0%, citing the lifting of the country's COVID-19 related restrictions late last year. All eyes will now focus on the annual meeting of the National Party Congress, China's parliament, slated to begin on Sunday in Beijing. During the week-long congress the govenrment is expected to unveil its GDP growth forecast for this year.
"If the 2023 target is around 5.5% then the investors will consider that in-line with general market expectations, whereas a 5% target may disappoint," said Alvin Tan, head of Asia currency strategy at RBC Capital Markets.
Most Chinese provinces aim for economic growth of above 5% this year, according to local government work reports, as previously reported by Reuters. The world's second-largest economy grew 3% in 2022, marking one of its slowest growth rates in nearly half a century. The global dollar index rose to 104.952 from the previous close of 104.869.
The offshore yuan was trading 0.16% weaker than the
onshore spot at 6.9383 per dollar.
The one-year forward value for the offshore yuan traded at 6.7601 per dollar, indicating a roughly 2.64%
appreciation within 12 months.
The yuan market at 3:11AM GMT:
ONSHORE SPOT: Item Current Previous Change PBOC midpoint 0.17% 6.94 6.9519
Spot yuan 0.09%
6.9274 6.9335
Divergence from
midpoint*
-0.18%
Spot change YTD
-0.40%
Spot change since 2005
revaluation 19.47%
OFFSHORE CNH MARKET
Instrument Current Difference
from onshore
Offshore spot yuan
* -0.16%
6.9383
Offshore
non-deliverable 6.76 2.66%
forwards
**
*Premium for offshore spot over onshore
**Figure reflects difference from PBOC's official midpoint,
since non-deliverable forwards are settled against the midpoint. .
(Reporting by Georgina Lee; Editing by Simon Cameron-Moore)
