Yuan surged over 7 per dollar on weakening Covid restrictions

The Chinese yuan strengthened against the US dollar on Monday, breaking 7 for the first time since mid-September. This is due to the partial lifting of COVID-19 restrictions.

However, experts predict that the economic recovery of China after the pandemic is not going to be easy, so the yuan is likely to fluctuate. 

The currency surged 1.6% last week, i.e. the highest weekly gain since 2005. The rise came amid market expectations for a further loosening of COVID controls. 

Over the weekend, more cities, including Shanghai and Urumqi, announced that COVID restrictions had been partially lifted, as authorities want to make the "zero tolerance" policy less burdensome.

Several international institutions, including UBS and Goldman Sachs, have expressed optimistic sentiment about the upcoming economic recovery in China. 

Standard Chartered estimated that the growth rate of real consumption by Chinese households will reach 7% next year. Earlier, the indicator was hovering around 0.2%. Thus, experts' expectations are rising due to the country's anti-COVID restrictions’ lifting. In this case, the peak will be in the second quarter of 2023.