Dollar lower after China eases COVID rule

by Jonathan Adams
china covid rule

Against a basket of currencies, the U.S. dollar index steadied at 104.12

The dollar moved broadly lower on Tuesday while Australia and New Zealand’s currencies jumped as risk appetite grew after China said it will scrap its COVID quarantine rule for inbound travellers – a major step towards easing curbs on its borders.

The New Zealand dollar surged 0.65% to $0.63115 while the Aussie gained 0.25% to $0.67485 in mostly thin trading amid the year-end holiday season. The two currencies are often used as liquid proxies for China’s yuan.

China will stop requiring inbound travellers to go into quarantine on arrival starting Jan. 8, the National Health Commission said on Monday, even as COVID cases spike. At the same time, Beijing downgraded the regulations for managing COVID cases to the less strict Category B from the top-level Category A.

There seems to be no let-up in the pace of relaxing COVID restrictions despite the surge in COVID cases in the mainland, said Christopher Wong, a currency strategist at OCBC. This perhaps demonstrates Chinese policymakers’ resolve to full reopening.

In addition, there was news of China potentially taking extraordinary measures to support growth, Wong said.

Elsewhere, sterling rose 0.16% to $1.20865, while the euro edged 0.06% higher to $1.06395.

Against a basket of currencies, the U.S. dollar index steadied at 104.12.

Data released on Friday showed that U.S. consumer spending barely rose in November, while inflation cooled further, reinforcing expectations that the Federal Reserve could scale back on its aggressive monetary policy tightening path.

In line with its seasonal trend, December has been a soft month for the greenback, said ING FX strategist Francesco Pesole.

Pesole said: It’s worth remembering that the dollar rose in each of the past four years in January. Our view for early 2023 is still one of dollar recovery.

Disclaimer: The opinions expressed by our writers are their own and do not represent the views of Trading and Investment News. The information provided on Trading and Investment News is intended for informational purposes only. Trading and Investment News is not liable for any financial losses incurred. Conduct your own research by contacting financial experts before making any investment decisions.

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