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China’s yuan briefly hits its highest level in 1 1/2 weeks, but then it falls into the red.

The yuan briefly hit its highest level against the dollar in more than a week and a half, but by midday on Thursday, it had lost all of its gains. This was because Chinese cities were tightening rules to stop the spread of COVID, which put more pressure on the economy.

This week, the yuan has been up and down like a roller coaster. On Tuesday, it fell to a level that hadn’t been seen in almost 15 years, but the next day, traders and companies rushed to get rid of their long dollar positions after the state bank sold dollars to support the local unit.

Before the market opened on Thursday, the People’s Bank of China (PBOC) set the midpoint rate at 7.1570 per dollar, which was 68 pips higher than the previous fix of 7.1638.

Related: Analysts warn of a “price war” as Tesla cuts prices in China by up to 9%.

Traders and analysts said the midpoint was in line with what the market expected and helped move spot prices closer to the official guidance rate. The fixing on Thursday was 3 pips stronger than Reuters’ estimate, which was 7.1573.

Christopher Wong, an FX strategist at OCBC Bank, said in a note that the official midpoint “helped to stabilise sentiment and confirmed that the Chinese government does not want disorderly or one-time sharp adjustments.”

The onshore yuan started the day at 7.1632 per dollar and went up to a high of 7.16, which is the highest level since Oct. 18. But by noon, it was trading at 7.2165, which was 455 pips, or 0.6% less than the last late session close.

“The panic selling of RMB and Chinese assets seems to be over, but we expect the CNH and CNY spot to trade in a range between 7.1 and 7.3 in the short term. The key drivers for the RMB will be the movement of the USD and updates on China’s policy roadmap under the new leadership, “said Ken Cheung, chief Asian FX strategist at Mizuho Bank.

Some traders and analysts said that the market’s rising hopes that the U.S. Federal Reserve will be less aggressive about raising interest rates helped boost the yuan’s mood early in the day. This was because the dollar was falling at the time.

Also, companies usually need more Yuan to pay for different things as the year comes to a close.

Some currency traders say that households and businesses have started to settle their FX receipts after getting such conversions at better prices. They say that the conversions could help the local unit even more.

Some analysts said, though, that the weak economy is likely to keep putting pressure on the yuan.

“Given China’s economic headwinds, the medium-term uptrend (in USD/RMB) is still in place,” said Alvin Tan, head of Asia strategy at RBC Capital Markets. “However, the government will continue to try to control the movement,” he added.

The economy came back faster than expected in the third quarter, but a stronger recovery in the long run will be hard because of COVID-19 restrictions, a deep property slump, and the risk of a global recession.

China reported more than 1,000 new COVID cases for the third day in a row on Thursday. This is a small number compared to the tens of thousands per day that led to a full-scale lockdown in Shanghai earlier this year, but it is enough to cause more curbs and restrictions across the country.

Cities from Wuhan in central China to Xining in the northwest are doing more to stop the spread of COVID-19. They are sealing buildings, locking down neighbourhoods, and putting millions of people in danger as they try to stop the outbreaks from getting worse.

Profits at big industrial firms fell at a faster rate from January to September, which is another worrying sign.

By noon, the global dollar index was at 109.769, and the offshore yuan was worth 7.2313 dollars per dollar.

At 04:01 GMT, the yuan market:

onshore location

Change the current item.

7.157 7.1638 0.10% PBOC midpoint

7.2165 7.171-0.63% yuan spot

a decrease from 0.83%

midpoint*

Change on the spot: -11.94%

Change in location since 2005: 14.69%

revaluation

Important lists

Change the current item.

0.0

Reuters/HKEX

CNH index

The USD index is 109.769 109.7 0.1.

Related: The dollar eats up what is thought to be yen intervention; China data is mixed.

There is a difference between the dollar and the yuan exchange rate. When the number is less than zero, it means that the spot yuan is trading for more than the midpoint. The official midpoint exchange rate that the People’s Bank of China (PBOC) sets each morning can go up or down by 2%.

AWAY FROM HOME CNH MARKET

Current Instrument Difference

From the Coast

The offshore spot yuan rate is 7.2313-0.20%.

7.077 1.13% offshore

non-deliverable

fronts **

Offshore spots cost more than onshore ones.

The figure shows the difference from PBOC’s official midpoint since non-deliverable forwards are settled against the midpoint.

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