SHANGHAI: China’s yuan briefly touched a one-week low against the dollar before recovering all the losses by midday on Thursday, as better-than-expected May export data boosted market sentiment and eased some fears over broader COVID-19 disruptions to the economy.

China’s exports grew at a double-digit pace in May and twice as fast as expected as factories resumed production and logistics snags eased after authorities relaxed some COVID curbs in Shanghai.

“The strong trade figures indicated the pick-up in economic activities and production, and helped alleviate the concern over China growth,” said Ken Cheung, chief Asian FX strategist at Mizuho Bank.

China’s yuan eases amid concerns of increasing policy divergence

Cheung maintained his view that the yuan was likely to trade in a range of 6.6 to 6.8 per dollar in the near term.Prior to the market opening, the People’s Bank of China (PBOC) set the midpoint rate at 6.6811 per dollar, 177 pips weaker than the previous fix 6.6634.

In the spot market, onshore yuan opened at 6.6949 per dollar and eased to a one-week low of 6.7028 before recouping the losses to trade at 6.6745 by midday, 105 pips firmer than the previous late session close.

While currency traders said the trade data supported the yuan in morning trade, some investors said they were nervous about new COVID lockdowns in parts of Shanghai, which just emerged from a two-month long lockdown.

By midday, the global dollar index fell to 102.414 from the previous close of 102.542, while the offshore yuan was trading at 6.6783 per dollar.