Aussie Lower On China Manufacturing Data, Yen Rebounds On Trade

Aussie and Kiwi are both weighed down by economic data in Asian session. The HSBC/Markit manufacturing PMI in China dropped from 49.6 to 48.1 in March, staying in contraction region and was the lowest number since last November. An HSBC economists noted that growth momentum in China could slow further on sluggish export new orders and softening domestic demand. On the other hand, Q4 GDP data from New Zealand showed 0.3% qoq growth only, half of expectation of 0.6% qoq. Traders are paring bet for a rate hike from RBNZ this year after the data. AUD/USD broke through recent support and resumed the fall from 1.0852. NZD/USD is back pressing recent support of 0.8063.

Sentiments were nonetheless, stabilized on additional easing measures from China. PBoC announced, in order to boost credit, a reduction of reserve requirement ratio in 379 more branches in rural areas of the Agricultural Bank of China. The scheme was initially applied to 563 branches in 8 provinces. The reduction of the ratio by 2% is expected to free up RMB 23B. The impact to market was mild though as it's seen as part of the targeted fine-tuning of policy with the use of so called "differentiated reserve ratios".

Japanese yen rebounded strongly today as Japan posted the first trade surplus in five months. February trade turned to JPY 32.9b surplus, a significant turn around from January's record deficit of JPY 1.48T. Looking at the details, export to US rose 11.9% yoy, the strongest rise since December 2010. Total exports, though, dropped -2.7% yoy but was better than markets expectation of -6.4%, not to mention January's -9.2% yoy fall. Overall import rose 9.2% yoy comparing with expectation of 8.4%. The outlook is still unclear though, as better demand from US would be offset by weakness to Europe and possibly China too.

Looking ahead, the economic calendar is rather busy today. Eurozone PMIs will be watched together with UK retail sales in European session. Canadian retail sales will be featured later today. From US, initial jobless claims, house price index and leading indicators will be released.