China PMI, Factory Survey Helps Strengthen Yuan

Investors’ risk appetite was boosted in favor of emerging economies. This was in part due to positive results from China’s factory activity. The PMI was expected to rise in March, following February’s 49.2 record low (for three years). Many economists expected it to rise to 49.5 and no more. That caused a big stir in the market when the new PMI came out at 50.5, a full point ahead of expectations.

Australian Dollar rises, Yen stumbles

This news pushed the Australian dollar up by 0.4% against the US Dollar. The Australian Dollar has been seen by many in the market as a proxy for China’s economic future.

The Yen, however, lost to the greenback. The UD Dollar rose 0.3%, rising a full 1.3% higher than the almost month and a half low it touched a week ago. It stood at 111.12 against the Yen at the time of writing.

Offshore trade of China’s national currency, the Yuan, gained 1/4 of a percent, bringing it to 6.707 versus the greenback.

Investors shouldn’t get too happy says, economist

If the market gets carried away, it could lead to a set back down the road warned Ayako Sera. Sera, who is a market economist at Sumitomo Mitsui Trust Bank, shed some light on the current situation in China.

She said that the Chinese government’s policy support is doing a good job. She stresses that the policy was put in place to stop a drop, not to fuel a rise. People expecting an acceleration in the Chinese economy could be badly burned in the near future.

The positivity has helped the Mexican Peso and Soth African rand to rally. The Peso managed to gain 0.35% against the dollar. This lead to a price of 19.364. The South African Rand managed to gain 0.8%, giving it a 14.395 price to the US dollar.

Japan a big loser this month

News out of Japan is decidedly less positive. The key indicator that paints a bad picture is the same factory out report that helped China. March’s factory output numbers have fallen the fastest in three years. The BoJ tankan survey did not make for pleasant reading in the industry. It showed a worsening in business sentiment among the largest Japanese companies. It also showed trade with South Korea as getting smaller.

The Euro has is sitting at a three week low, with no positive signals in site for the time being. Klaas Knot, who sits on the race committee for the Dutch Central Bank, had interesting news. He is perhaps the most prominent hawk on the committee. When he says that interests will be even lower after policy normalization, most industry insiders tend to listen.

Sterling was was slightly lower at $1.3032, though not quite at the level it was a month ago when it dipped to $1.2945. Brexit has been causing havoc in both the UK and mainland Europe with instability and insecurity on all sides. The UK parliament is not able to agree on any course of action, and the outlook does not look promising despite the two-month long extension they have received in lieu of the catastrophic consequences of a no-deal Brexit.

If the MPs agree on either the customs union or peoples vote options, leading to a soft-Brexit, Sterling could get much stronger much quicker. This is according to Sheema Shah. She is a global investment strategy for a top London investment firm.