CNH: USD/CNY Fixe Edges Lower

• CHINA SETS YUAN CENTRAL PARITY AT 7.1697 WEDS VS 7.1733

In Tokyo morning trade, JGB futures are weaker, -10 compared to settlement levels, after reversing the modest gains seen overnight. 

• Japan's Feb trade figures saw a firmer export backdrop, albeit not as strong as market forecasts. We rose 11.4%y/y (forecast was 12.6%, the prior 7.3%). Imports were slightly below expectations as well, printing -0.7%y/y (+0.8% forecast, while the prior was +16.2%). The trade surplus was slightly below expectations, we printed ¥584.5bn, versus ¥688.3bn expected, but still a step up from the prior -¥2736.6bn outcome. The seasonally adjusted trade surplus was ¥182.3bn, which was also below forecasts but improved on the Jan print.
• Japan Jan core machine orders were below forecasts. In m/m terms we fell -3.5%, versus a -0.1% forecast and prior was -0.8% for Dec. In y/y terms, we were still up 4.4% but sub the 6.6% market consensus.
• The BoJ is expected to keep its policy rate at 0.50% today, with no urgency for another hike after its January increase.
• Cash US tsys are flat to 1bp cheaper, with a steepening bias, in today’s Asia-Pac session ahead of today’s FOMC decision.
• Cash JGBs are flat to 1bp cheaper across benchmarks. The benchmark 10-year yield is 1.0bp higher at 1.517% versus the cycle high of 1.58%.
• Swap rates are ~1bp higher. Swap spreads are wider.

USD/JPY is drifting a little higher in the first part of Wednesday dealings, ahead of the BoJ meeting outcome. We were last in the 149.60/65 region, up around 0.25% from end NY closing levels on Tuesday. This is still under intra-session highs from Tuesday of 149.93. 150.18 is the March 5 high, while the March 3 high at 151.30 is seen as a key resistance level. US equity futures are recovering some ground, up 0.28-0.36%, which may leaning modestly against the yen. 

• Overnight implied USD/JPY vols are elevated at 18.84%, but comfortably sub highs from 2024, which got into the 35-40% range. The implied range into March 20 for USD/JPY is 147.74-150.70, with a probability of just under 75%.
• Such a backdrop, if realized, would still keep USD/JPY within March to date ranges. It also fits with no change expected from today's BoJ meeting, with the central bank having time to assess wage and consumer spending trends (along with inflation) before deciding on the timing of the next hike.
• The Fed decision, later on Wednesday US time, is seen as on hold. That's not a surprise, with FOMC participants seen as holding their rate views steady as they weigh the risks of higher inflation vs weaker growth/employment amid major government policy shifts. Still, uncertainty rests on hold the dot-plot will evolve.
• Note as well the following option expiries for NY cut later today: Y147.00($1.3bln), Y148.50($1.4bln), Y149.00($1.2bln), Y150.00($1.5bln)