- USD/CNH takes further measures after China’s central bank took steps to combat the coronavirus (COVID-19).
- PBOC cuts seven-day reverse repo rate, Moody’s cited weakness of China’s shadow banking industry.
- China’s Commerce Ministry, President Xi remain optimistic.
USD/CNH remains on the front foot around 7.1080 after the People’s Bank of China (PBOC) announced a rate cut on early Monday. Earlier, comments from China’s Commerce Ministry and President Xi Jin Ping kept the normal optimistic tone whereas Moody’s cited further weakness of the domestic shadow banking industry.
Read: China cuts interest rate, injects $7 billion into banking system
In its yet another move to fight the pandemic, China’s PBOC announced 20 basis points (bps) of a rate cut to its seven-day reverse repo. With this, the Chinese central bank’s benchmark interest rate currently stands at 2.2%.
Over the weekend, China’s President Xi Jinping said that the government will adjust support policies to protect small and medium firms from the impact of coronavirus outbreak. The national leader also pushed for the active resumption of operation and production to tame the negative implications of the coronavirus (COVID-19) epidemic.
Following that, China’s Commerce Ministry also crossed wires while saying that around 80% of restaurants are open for business. It was also mentioned that nearly all major supermarkets, convenience stores, shopping malls and farm produce retail markets have reopened.
Furthermore, Moody’s said that China’s shadow banking industry continues to shrink but the nationwide leverage is set to rise further. It’s worth mentioning that China reported 31 new coronavirus cases in the Mainland as of end-march 29 versus 45 a day earlier.
Amid all this, the market’s risk-tone remains heavy with the US 10-year treasuries declining nine basis points (bps) to 0.656% whereas stocks in Asia also marking losses by the press time.
Moving on, investors now await China’s official PMI numbers for March, up for publishing tomorrow, for fresh impulse.
Technical analysis
A six-day-old falling trend line near 7.1250/55 seems to limit the pair’s immediate upside while February month high near 7.0590 can check the bears during the downside.
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