Bloomberg: China’s reopening supports yuan

05 December 2022 216
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Source: Bloomberg

Author: Tania Chen and John Cheng

Article: Original article

Publication date: Monday, December 5, 2022

The national currency of China broke the level of 7 yuan per dollar as a gauge of Chinese stocks in Hong Kong rose by 4.1%. The dollar bonds of developers also increased due to a fact that the country’s financial center, Shanghai, and its neighboring city of Hangzhou joined other areas in easing COVID-Zero restrictions.

As it was said by head of investment strategy at KGI Asia in Hong Kong Kenny Wen, there are more signs of easing COVID curbs, and such positive factors weren’t fully taken into account by the market.

COVID-Zero is likely to stay in China until April. Although, strategists at Goldman Sachs consider there’s now a higher probability of an earlier exit. As it was stated in a note by strategists of Commonwealth Bank of Australia, led by Joseph Capurso, head of international economics, they suggest that recent public protests against the tight COVID curbs had their impact on the government in terms of accelerating its plans of economic reopening. They also added that the dollar might increase its losses against the yuan this week if there are more signs of China being ready to abandon its strict COVID policy.

Some analysts are still cautious, warning that the yuan will continue its growth only in case Beijing is able to sustain stable economic recovery next year. The upcoming meeting of the Politburo in December will be a key event for the markets, as the guidelines for economic policymaking are about to be voiced there.

Forecast: the USD/CNY decline will continue.

This content is for informational purposes only and is not intended to be investing advice.

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