SHANGHAI: China’s yuan rebounded to reach a one-week high against the dollar on Friday, shrugging off a much weakened official guidance fix, on growing market hopes authorities might relax some of the country’s strict COVID-19 prevention measures.
China has maintained its zero-COVID strategy this year, hurting the outlook of the world’s second-largest economy.
Hopes that restrictions could ease pushed mainland China and Hong Kong stocks higher, and the spillover effect benefited the currency market, traders said.
Prior to market opening, the People’s Bank of China (PBOC) set the midpoint rate at 7.2555 per dollar, 83 pips weaker than the previous fix of 7.2472, and the weakest since Jan. 22, 2008.
In the spot market, the onshore yuan opened at 7.3140 per dollar and touched a one-week high of 7.2340 before easing a bit to 7.2511 as of 0650 GMT.
“Rumors are all over the place these days, but markets really hope there would be some relaxation,” said a trader at a foreign bank.
Hong Kong and China stocks jumped on Tuesday after rumours based on an unverified note circulating on social media that China was planning a reopening from strict COVID curbs in March. A Chinese foreign ministry spokesman said at the time he was unaware of any such moves.
Most analysts expect no significant easing of the zero-COVID policy until March next year at the earliest, with some predicting it could last into 2024. “Given the zero-COVID policy, we remain cautious on the outlook for the Chinese economy until some relaxation comes about,” analysts at ANZ said in a note.
“Also, with impending key personnel changes in the economic portfolio, investors remain cautious until clarity emerges in the coming weeks and months.” They expect the yuan to remain rangebound trading with floor at around 7.35 per dollar, until the dollar peaks or domestic dynamics change.
On the ground, China’s health authority on Wednesday vowed to “unwaveringly” stick to its zero-COVID policy, as domestic coronavirus cases hit their highest in two and a half months on Thursday.
Comments
Comments are closed for this article.