SHANGHAI: China’s yuan crept higher against the dollar in thin holiday trading on Monday, with investors awaiting data due later this week to gauge the economic impact of Beijing’s decision to dismantle its strict COVID-19 protocols earlier this month.
In the spot market, the onshore yuan opened at 6.9900 per dollar and was changing hands at 6.9789 at midday, 129 pips firmer than the previous late session close.
Prior to the market’s opening, the People’s Bank of China (PBOC) set the midpoint rate at 6.9825 per dollar, 15 pips weaker than the previous fix of 6.9810.
“The yuan is likely to end the year at current levels and on the firmer side of the key 7 per dollar level,” said a trader at a Chinese bank, noting the market lacked clear guidance with trading levels thin.
Trading volume had shrunk to $2.6 billion as of midday, well down on a normal half-day volume of about $15 billion.
Meanwhile COVID case numbers are now surging across the country, with the country’s two biggest cities - Shanghai and Beijing - moving closer to living with COVID.
Zhejiang, a big industrial province near Shanghai, is battling around a million new daily infections, a number expected to double in the days ahead, the provincial government said on Sunday.
Win Thin, global head of currency strategy at Brown Brothers Harriman, warned the economy could “come to a grinding halt this month.”
“How long the slowdown is will depend on how the virus spreads but early indications are not good,” he said in a note published late last week.
Currency traders also said they would pay close attention to December factory activity data due on Saturday to gauge the scale of disruption to economic activity from the COVID infections spike.
“Recent market concern lies in how the broad economy would recover after the pandemic subsides, and the high-frequency economic data could be an important reference,” analysts at CICC said in a note.
By midday, the global dollar index stood at 104.325, while the offshore yuan was trading at 6.99 per dollar.
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