Yuan rises to one-week high on corporate demand and as Omicron jitters ease

Shanghai

CHINA'S yuan touched a one-week high against the US dollar on Monday (Nov 29), on corporate demand for the local currency and easing worries over the spread of the Omicron coronavirus variant.

First detected in Southern Africa, the new variant has spread around the world, with more countries imposing travel restrictions. But some domestic experts said the variant would not have a major impact on China for now, due to the country's strict virus containment measures.

"The recent resurgence of new variant Omicron may be the catalyst for more supports to RMB assets given China's border is still largely closed to foreigners and its dynamic zero Covid strategy is still in place," said Tommy Xie, head of Greater China research at OCBC Bank.

Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.3872 per US dollar, the highest since Nov 19 and 64 pips firmer than the previous fix of 6.3936. In the spot market, the onshore yuan opened at 6.3850 per US dollar and rose to a high of 6.3820 at one point, the strongest level since Nov 22. At midday, it was changing hands at 6.3828, 102 pips firmer than the previous late session close.

The onshore yuan also looked set for a fourth straight monthly gain in November.

Traders said strong corporate demand for yuan and China's strict virus measures to quickly quell local outbreaks and travel restrictions should continue to provide support for the local currency.

Chinese companies usually have higher demand for the yuan towards the year-end and the subsequent long Chinese New Year holiday early in the year, prompting heavier conversion of their US dollar receipts into the Chinese currency in recent months.

Separately, China's foreign exchange regulator said on Friday it would expand the scope of banks' foreign exchange derivatives business to guide companies to establish a risk-neutral mentality by hedging their FX risks.

By midday, the broad US dollar index rose to 96.266 from the previous close of 96.198, while the offshore yuan was trading at 6.3832 per US dollar. REUTERS

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