Yuan ends at strongest since late-Sept as China eases some COVID curbs – Financial Post

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SHANGHAI — China’s yuan on Friday ended the domestic trading session at its strongest level since late-September, as investors cheered the Chinese government’s decision to ease some of the country’s strict COVID-19 prevention controls.

The onshore yuan finished at 7.1106 per dollar, the strongest such close since Sept. 30, up 739 pips, or 1.04%, from the previous late night close of 7.1845.

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Its offshore counterpart followed the strengthening trend to trade at 7.0998 per dollar around 0830 GMT.

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The rise in the Chinese yuan also came as the dollar languished after cooler-than-expected U.S. inflation data fueled expectations for slower Federal Reserve rate hikes.

Chinese health authorities on Friday eased some of the country’s heavy COVID-19 curbs, including shortening by two days the quarantine times for close contacts of cases and inbound travelers, and eliminating a penalty on airlines for bringing in infected passengers.

“It looks like the two game changers coming together,” said Ken Cheung, chief Asian FX strategist at Mizuho Bank.

“Investors are squeezing their short yuan positions,” he added, seeing further upside room for the yuan to head to 7.05 per dollar.

Persistent COVID-19 disruptions, stringent prevention measures and mobility restrictions have piled pressure on the world’s second-largest economy, with the International Monetary Fund in October cutting China’s full-year growth forecast to 3.2% from 4.4% previously.

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Marco Sun, chief financial market analyst at MUFG Bank (China), said Friday’s adjustments were “suggestive signs” China’s COVID-19 policy might have changed.

“Hence, the market believes we could see the pivot early next year,” Sun added, noting such expectations pushed the currency and stock markets higher on Friday afternoon.

Prior to the market’s opening, the People’s Bank of China (PBOC) set the midpoint rate at 7.1907 per dollar, the highest since Oct. 31. That represented a 0.7% rise on the previous fix of 7.2422, the biggest one-day jump in the official rate guidance in nearly six months.

Traders and analysts said the official midpoint largely matched their projections, reflecting the broad dollar weakness in global markets. Friday’s fixing was 17 pips weaker than Reuters’ estimate of 7.1890. (Reporting by Shanghai Newsroom; Editing by Lincoln Feast, Ana Nicolaci da COsta, and Uttaresh.V)

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