China’s foreign reserves could see a m/m rise in March

China's macro data for March is likely to improve along with robust money and credit supply, although the sustainability of the recovery over the medium term is still in doubt. Data released this week showed China’s official and Caixin PMI both surprised the market on the upside.

A relatively steady CNY and a strengthening EUR in March is also likely to keep China’s foreign reserves supported.  The nation's foreign reserves for March are likely to beat market expectations and rise somewhat from a month earlier. This will likely bolster risk-appetite and EM and commodity currencies are likely to remain supported.

"CFETS RMB Index is likely to slide further if DXY Index continues to decline, as the CNY is expected to underperform other currencies in CFETS basket when the dollar weakens. We maintain our forecast that USD/CNY will reach 6.70 at the end of 2016." said Scotiabank in a report.