China’s yuan slips, traders wary of reopening risks


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SHANGHAI — China’s yuan weakened on

Tuesday as the dollar gained broadly, with sentiment also curbed

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by growing caution that the recovery in the world’s

second-biggest economy could be gradual and bumpy even as

Beijing eases strict COVID policies.

Despite the recent rebound triggered by economic reopening

hopes, the yuan will remain under depreciation pressure next

year, some analysts argue.

The spot yuan slipped 0.2% to 6.9738 per dollar

around midday, despite the central bank setting the guidance

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rate at a two-month high.

Still, the Chinese currency has jumped nearly 5% against the

dollar since November on expectations of an eventual reopening

of China’s economy.

Maybank attributed the yuan’s weakness on Tuesday to an

overnight rebound in the U.S. dollar triggered by unexpectedly

strong economic data.

U.S. data, including October factory orders and durable

goods orders “surprised to the upside and halted the momentum of

USD bears.” The dollar index bounced 0.7% overnight from

a five-month low.

Sentiment was also eroded by growing concerns over the risks

from eased COVID curbs in China.

“Ending zero-COVID is encouraging and should be quite

positive for markets, but we caution that the road to reopening

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may be gradual, painful and bumpy,” Normua said in a note to


“China does not appear to be well prepared for a massive

wave of COVID infections, and it may have to pay for its

procrastination on embracing a ‘living with COVID’ approach.”

Bart Wakabayashi, branch manager at State Street in Tokyo,

said the past week has been dominated by expectations of some

relief from the zero-COVID policy, which pose broad implications

for global trade and supply chain issues.

“I think there’s been a lot of speculative yuan buying for

those reasons, and the market will continue to be driven by

whatever media headlines we get on variations of China’s

zero-COVID policy.”

CIB Research analysts defined the recent yuan strength as a

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rebound, rather than trend reversal, arguing that sustained

strength requires China’s shift toward monetary tightening, and

a sharp drop in U.S. interest rates.

The yuan is under depreciation pressure over the long term,

so “don’t be in a hurry closing dollar exposure around the

Chinese New Year,” they said in a note to clients.

The yuan market at 3:34AM GMT:


Item Current Previous Change

PBOC midpoint


6.9746 7.0384

Spot yuan


6.9742 6.9605

Divergence from



Spot change YTD


Spot change since 2005

revaluation 18.67%

*Divergence of the dollar/yuan exchange rate. Negative number

indicates that spot yuan is trading stronger than the midpoint.

The People’s Bank of China (PBOC) allows the exchange rate to

rise or fall 2% from official midpoint rate it sets each



Instrument Current Difference

from onshore

Offshore spot yuan

* 0.10%



non-deliverable 6.809 2.43%



*Premium for offshore spot over onshore

**Figure reflects difference from PBOC’s official midpoint,

since non-deliverable forwards are settled against the midpoint.


(Reporting by Shanghai newsroom

Editing by Shri Navaratnam)



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