Skip to content

Chinese Yuan Rises to Four-Month High on Reopening Optimism

The Chinese yuan experienced significant growth on Friday, reaching a four-month high as investors anticipate a strong economic boost from reopening China's borders this month.

Renminbi Bills
Renminbi Bills

The yuan rose 0.4% to 6.8533, its strongest level against the dollar since August. The offshore yuan also increased by 0.5%. China announced that it would also reopen its borders with Hong Kong, allowing quarantine-free transit with the financial hub as the country moves further away from its strict zero-COVID policy. While this move is expected to bring about further relaxation of anti-COVID rules, it has also led to a significant spike in local COVID-19 cases, which markets worry may cause near-term disruption.

Markets Await U.S. Payroll Data for Economic Cues

Broader Asian currencies were largely unchanged on Friday, with markets turning cautious ahead of key U.S. nonfarm payroll data due later in the day. While the reading is anticipated to show some easing in the tight labor market, traders are wary of any signs of strength in the sector, which could give the Federal Reserve more leeway to maintain its hawkish stance.

The nonfarm payrolls reading has also been higher than expected for the past eight months, causing traders to be cautious of another potential surprise. The dollar index and futures were flat on Friday but hovered near a one-month high after a strong start to the year.

While the Federal Reserve has indicated that it will raise interest rates at a slower pace in the coming months, it has also reiterated that rates will remain higher for longer, potentially leading to further strength in the dollar in the coming months. This trend has weighed on Asian currencies as the gap between risky and low-risk debt narrows. This is expected to continue in the near term.