Yuan jumps past seven per US dollar as Covid curbs ease

SHANGHAI: China’s yuan firmed past the closely watched seven-per-US-dollar (RM4.385) level yesterday, hitting its strongest since mid-September, as Beijing eased some of its strict Covid-19 curbs, potentially attracting fresh foreign inflows.

The Chinese currency was also bolstered by expectations of slower United States interest rate hikes, which knocked the dollar index to near five-month lows.

But some warn that China’s road for economic recovery could be bumpy and that the yuan will remain volatile.

Potential “policy U-turns or worsening of the infections could be seen as opportunities to short” the currency, Maybank Bhd said in a note to clients.

The onshore yuan jumped roughly 1.4% to as high as 6.9507 yesterday, its strongest since Sept 13, tracking the central bank’s firmer midpoint guidance.

Last week, the yuan jumped about 1.6%, its biggest weekly gain since 2005 amid expectations authorities will continue to loosen strict Covid curbs.

In the offshore market, the yuan gained 1.1% to a two-month high of 6.9438, after posting record weekly gains.

More cities, including financial hub Shanghai and Urumqi in the far west, announced an easing of curbs over the weekend as China tries to make its zero-Covid policy more targeted and less onerous after unprecedented protests against restrictions.

China’s benchmark CSI300 index jumped nearly 10% in November, as mainland stocks witnessed monthly net inflows exceeding 60 billion yuan (US$8.55bil or RM37.5bil) via the cross-border Stock Connect scheme.

Morgan Stanley on Sunday upgraded China’s equities to “overweight”, citing “multiple positive developments alongside a clear path set towards reopening”.

The Wall Street bank joined a slew of global institutions, including UBS and Goldman Sachs, in turning bullish towards China on expectations of an eventual reopening of the economy. — Reuters

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