CHINA RATES: China Repo Rates Diverge On Friday

ACGB's are holding cheaper in Wednesday's dealing after the core Global FI cheapening witnessed yesterday weighed in early dealing. Ranges have been narrow with little follow through on moves.

• Cash ACGB's sit 2-7bps cheaper across the major benchmarks, the curve has bear flattened.
• Futures are a touch lower, XM (-0.035) and YM (-0.066).
• Rabobank Rural Confidence Index improved slightly in Q1 to -22 from -25 as Rabobank noted that farmers are adjusting to a normalisation in economic conditions.

USD/JPY is back sub the 140.00 level, last in the 139.95/00 region. In yen terms we are around 0.15% firmer versus Tuesday NY closing levels. A slight drift down in US Tsys yields (led by the front end) is likely aiding the move. Other majors are mixed against the USD, EUR/USD steady around 1.0790, while AUD and NZD are higher.

• For USD/JPY we remain comfortably above post US CPI lows near 139.00.

The USD/CNY fixing printed at 7.1566, versus a Bloomberg consensus of 7.1565.

• Today's fixing is in line with the Bloomberg consensus. Following yesterday's +29pip surprise in USD/CNY terms, the 5-day rolling sum of the fixing error terms sits in positive territory at +15pips.
• From a trend standpoint there is clearly little push back via the fixing mechanism to CNY weakness. This obviously fits with recent policy rate cuts, with the market expecting a 10bps MLF cut tomorrow.
• USD/CNH was higher in earlier trade, getting close to 7.1790, but is more offered now, last around 7.1730/40, with lower USD/JPY levels (sub 140.00) helping at the margin.