May 22, 2024

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Dollar slips as easing COVID curbs in China lift sentiment

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SINGAPORE — The dollar slid across the

board on Monday as traders piled into riskier assets after more

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Chinese cities eased some of their COVID related restrictions,

stoking hopes of an eventual reopening of the world’s second

biggest economy.

Financial hub Shanghai and Urumqi in the far west were among

the cities that announced an easing of coronavirus curbs over

the weekend following recent, unprecedented protests against the

government’s uncompromising “dynamic zero-COVID” strategy.

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“It may seem like they are baby steps but nonetheless quite

a strong sign of China taking calibrated steps in the direction

of reopening,” said Christopher Wong, a currency strategist at

OCBC in Singapore.

China is soon set to announce a nationwide easing of testing

requirements as well as allowing positive cases and close

contacts to isolate at home under certain conditions, people

familiar with the matter told Reuters last week.

The dollar weakened below 7.0 yuan in offshore trade,

while the onshore yuan jumped roughly 1.4% to as high

as 6.9507 on Monday morning, its strongest since Sept. 13.

The dollar index, which measures the currency against

six major peers including the yen and euro, was down 0.268% at

104.19, its lowest since June 28.

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The index fell 1.4% last week, and 5% in November, making

for its worst month since 2010. The recent bearishness toward

the dollar had largely stemmed from expectations that the

Federal Reserve is set to dial down the pace of its interest

rate hikes after four consecutive 75 basis points increases.

Investors’ focus will be on U.S. consumer price inflation

data due out on Dec. 13, one day before the Fed concludes its

two-day policy meeting.

The U.S. central bank is expected to increase policy rates

by an additional 50 basis points at the meeting. Fed funds

futures traders are now pricing for the Fed’s benchmark rate to

peak at 4.92% in May.

OCBC’s Wong said some degree of caution is still warranted

as the Fed is not done tightening. “They are still tightening,

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it’s just that it is going to be in small steps.”

Meanwhile, the Japanese yen weakened 0.20% versus

the greenback to 134.59 per dollar, having gained 3.5% last

week, far off October’s low of 151.94.

The yen’s ascent comes at a time when the spotlight has been

on the drawbacks of prolonged monetary easing policy and ahead

of a Bank of Japan leadership transition when governor Haruhiko

Kuroda, regarded as a policty dove, ends his second term.

The BOJ should conduct a review of monetary policy framework

and tweak its massive stimulus program depending on the

outcome, its board member Naoki Tamura told the Asahi daily.

“You got a case of not just the Fed slowing its pace of

policy tightening but you also have the case of potential BOJ

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unwinding, maybe very early stage, some of its very

accommodative policy,” Wong said.

“The two forces coming from both sides can give the

dollar/yen a bit more downside … there is still room for

dollar/yen to test lower.”

The euro rose 0.32% to $1.0572, having gained 1.3%

last week. It had earlier touched a more than five month high of


Sterling rose to $1.23450, its highest since June 17,

and was last trading at $1.2327, up 0.33% on the day

The Australian dollar was up 0.59% at $0.683, while

the kiwi was 0.31% higher at $0.643.


Currency bid prices at 0634 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change


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Euro/Dollar $1.0575 $1.0541 +0.32% -6.98% +1.0585 +1.0512

Dollar/Yen 134.5400 134.2950 +0.20% +16.99% +134.7600 +134.2800


Dollar/Swiss 0.9350 0.9368 -0.17% +2.53% +0.9393 +0.9344

Sterling/Dollar 1.2329 1.2293 +0.28% -8.84% +1.2343 +1.2251

Dollar/Canadian 1.3411 1.3474 -0.45% +6.08% +1.3473 +1.3386

Aussie/Dollar 0.6832 0.6794 +0.55% -6.02% +0.6851 +0.6764

NZ 0.6430 0.6413 +0.23% -6.09% +0.6442 +0.6367


All spots

Tokyo spots

Europe spots


Tokyo Forex market info from BOJ

(Reporting by Ankur Banerjee in Singapore; Editing by Stephen

Coates & Simon Cameron-Moore)



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