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    Asian Session – Dollar flat ahead of NFP; China PMI turns positive

    Business sentiment surveys dominated Asian trading on the first day of April as key manufacturing indicators out of Japan and China were released.

    In China, the official manufacturing PMI turned positive for the first time in nine months as the index rose from 49.0 in February to 50.2 in March, beating forecasts of 49.3. The surprise reading, which indicates that manufacturing activity expanded slightly last month, may be a sign that the sector is turning the corner. However, analysts cautioned that the monthly upswing could be due to seasonal factors. Meanwhile, the non-manufacturing PMI showed activity in the rest of the economy strengthened to its best level since December.

    The alternate survey from Caixin also showed a notable improvement but the reading was still below 50. The Caixin manufacturing PMI increased from 48.0 to 49.7 in March and was above estimates of 48.2.

    It was a bleaker picture out of Japan though as the Bank of Japan’s quarterly Tankan survey showed a worsening business environment in the first quarter of the year. The big manufacturers index halved from 12 to 6 in the first quarter. This was the lowest reading since June 2013 and below expectations of 8. The report revealed weakened confidence across most industries with the Bank of Japan’s tweaks to monetary policy in December and January seen to have made little difference in boosting sentiment.

    The big non-manufacturing index also fell, but to a lesser extent, while the outlook indicator for the next three months by large manufacturers declined from 7 to 3, versus estimates of 6.

    The disappointing data did little to dent the resilient yen which actually strengthened after the report’s release. The dollar fell from around 112.50 yen before the data to an intra-day low of 112.05 in early Asian session, before recovering slightly to 112.36 yen in late trading.

    The greenback was steady on Friday but stuck not too far from Thursday’s lows. New York Fed President William Dudley yesterday repeated Yellen’s call for a cautious approach to raising rates, saying there were risks from the uncertainty in the rest of the world.

    The euro was trading around 1.1385 dollars in Friday’s Asian session but the pound edged slightly lower to 1.4351 dollars.

    Commodity currencies stayed firm but were off yesterday’s highs as crude oil prices continued to drift lower. US oil futures were last trading around $38 a barrel, helping the greenback reclaim the 1.30 level versus the Canadian dollar.

    The Australian and New Zealand dollars meanwhile eased to 0.7668 and 0.6905 respectively against the US dollar.

    Coming up later today, the March non-farm payrolls report and the ISM manufacturing PMI out of the US will be watched closely. But before then, European manufacturing PMI will come into focus in today’s European session.

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