China’s yuan has seen its best week in about 18 months, extending gains on Monday against the dollar.
Comments in Tokyo by US President Joe Biden that he was considering reducing tariffs on Chinese goods was one of a number of factors that helped lift the Chinese currency.
Bilateral trade disputes became a full-blown trade war during the Trump administration, and punitive tariffs imposed by Washington and Beijing on billions of dollars worth of each other’s goods were among the main forces pressuring the yuan and roiling global financial markets at that time.
“They were imposed by the last administration and they’re under consideration,” Biden said in Tokyo during a news conference with Japanese Prime Minister Fumio Kishida.
As of the domestic close, the onshore yuan was changing hands at 6.6634 per dollar, the strongest such close since May 5, and 287 pips or 0.43% firmer than the previous late night close of 6.6921. Its offshore counterpart traded at 6.6709 around 0830 GMT.
ALSO SEE: Biden Says US Willing to Use Military Force to Defend Taiwan
Shanghai Lifts More Restrictions
The yuan also gained some support as the financial hub of Shanghai lifted more of its Covid-19 restrictions. The city reopened a small part of the world’s longest subway system on Sunday after some lines had been closed for almost two months.
“With Shanghai’s plan of reopening in a gradual pace and reaching full openness by the end of June, activities in Shanghai would moderately improve sequentially this May,” said Li Lin, head of global market research for Asia at MUFG Bank.
“Possible marginal improvement in Covid-19 containment measures would happen in near future, but still no sign of turnaround on current national ‘dynamic zero Covid-19’ policy.”
Prior to market opening, the People’s Bank of China (PBOC) set the mid-point rate at 6.6756 per dollar, 731 pips or 1.1% firmer than the previous fix 6.7487 on Friday.
The move in Monday’s official guidance, the strongest fixing in more than two weeks, was the biggest one-day strengthening in percentage terms since 2005, when China revalued the currency and abandoned a decade-old peg against the greenback.
Currency traders attributed the yuan’s recent swings higher to dollar volatility in global markets, with investors cutting their bets on further dollar gains from rising US rates.
The yuan’s near-term performance would depend on the dollar and domestic Covid situations, a trader at a foreign bank said.
Beijing authorities on Monday extended work-from-home guidance for many of its residents to curb Covid-19 outbreaks in the capital.
• Reuters with additional editing by Jim Pollard
ALSO ON AF:
Foreign Investors Fleeing China – The Economist
Apple Looks Outside China as Lockdowns Disrupt Output – WSJ
PE Firm General Atlantic to Invest $2bn in India, Southeast Asia
