Lee Hardman, Currency Analyst at MUFG, notes that the rebound in emerging and commodity related currencies lost some upward momentum yesterday following the release of the weaker than expected Chinese trade report for February.
Key Quotes
“The acute weakness in both exports and imports has cast some doubt on the building optimism over the outlook for the Chinese economy and re-heightened concerns over the outlook for global growth. Recent comments from Chinese policymakers have signalled that they will play a more active role in supporting economic growth which has provided reassurance to global investors alongside the recent stability of the renminbi.
The smaller than expected drawdown in China’s FX reserves in February provided evidence that the capital outflows have eased in the near-term as well. However, our analysts in Hong Kong still expect the weakening of the renminbi to resume beyond the near-term.
They remain sceptical as well that policy stimulus will prove as effective as hoped in supporting economic growth given that the transmission mechanism is impaired by problems in the banking sector. It casts doubts over the sustainability of the recent rebound in emerging and commodity-related currencies which will require an improvement in the economic data from China in the coming months.”
(Market News Provided by FXstreet)
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