SHANGHAI: China’s yuan eased from a one-month high against the dollar on Tuesday, pressured by broad strength in the greenback, while some investors gauged the pace of economic recovery after Shanghai lifted its COVID-19 lockdown.
The dollar rose against its major trading partners as rising price pressures heightened demand for the safe haven dollar before the release of US inflation data later this week.
Prior to market opening, the People’s Bank of China (PBOC) set the midpoint at 6.6649 per dollar, 42 pips firmer than the previous fix 6.6691.
In the spot market, onshore yuan eased from a month high of 6.6391 per dollar hit on Monday and was changing hands at 6.6650 by midday, 106 pips weaker than the previous late session close.
A trader at a foreign bank said investors were anxious to evaluate the pace of economic recovery after the commercial hub of Shanghai lifted its two-month long lockdown on June 1.
“The rollout of a basket of Chinese pro-growth measures and the reopening in Shanghai and Beijing helped stabilise expectations for China growth,” said Ken Cheung, chief Asian FX strategist at Mizuho Bank.
“It appears that the re-pricing of China macro growth risk due to the lockdowns has run its course,” Cheung said, adding the bank will refrain from holding an excessively bearish view on the RMB at this stage as investors have largely digested the growth risk and hopes for recovery are emerging.
China’s yuan hits one-month high, buoyant dollar seen limiting gains
Several currency traders said markets will pay close attention to economic indicators, including China’s May trade and inflation data due this week.
Ming Ming, chief economist at CITIC Securities, said the yuan was likely to be affected by various factors in the near term including the dollar’s performance, improvements in Sino-US trade relations and corporate supply and demand for the greenback.
“Fluctuations in the yuan may increase, and it may continue to consolidate in a wide range,” Ming said.
Yuan volatility has been elevated in the last two months as a vast majority of traders in Shanghai and Beijing worked remotely, which affected liquidity. But conditions are expected to improve as traders return to their offices.
US President Joe Biden has said he is considering removing some of the tariffs imposed on Chinese goods.
His administration is seeking ways to cool inflation, and industry groups have called for tariff cuts to reduce costs for businesses and consumers.
By midday, the global dollar index rose to 102.6 from the previous close of 102.437, while the offshore yuan was trading at 6.6652 per dollar.